Israel's Finance Minister Bezalel Smotrich has reignited a fierce and long-standing economic battle with the Palestinian Authority (PA), declaring on Wednesday his intent to withhold the tax revenue Israel collects on behalf of the PA. This decisive action follows declarations by Norway, Spain, and Ireland to recognize a Palestinian state—an unprecedented challenge to Israel's sovereignty and diplomatic efforts.
The Palestinian Authority, notorious for rejecting every peace proposal from Israel, including two offers that exceeded their demands during the Oslo Accord negotiations, has continually sought international recognition as a means to pressure Israel into making unilateral concessions. Rather than engaging in constructive dialogue, the PA has aggressively lobbied world governments to acknowledge their statehood, bypassing the peace process altogether.
Pushing against unilateral Palestinian statehood, Israel's finance minister Bezalel Smotrich announced his intention to immediately halt the transfer of all monthly tax revenues that Jerusalem collects on behalf of the Palestinian Authority, moving to collapse the PA economy. pic.twitter.com/JgenMM0J0K
— Jewish News Syndicate (@JNS_org) May 22, 2024
Smotrich, backed by other Israeli ministers, announced the imposition of "harsh punitive measures against the PA for its unilateral actions against Israel, including its pursuit of unilateral recognition." This robust stance underscores Israel's resolve to defend its national interests against adversarial maneuvers.
US Treasury Secretary Janet Yellen voiced her concerns on Thursday, suggesting the decision "threatens economic stability in the West Bank." The tax revenue collected by Israel constitutes over 60% of the PA's income, with approximately 15% allocated to the notorious "Pay-To-Slay" program. This program incentivizes terrorism by providing financial rewards based on the severity of attacks, the number of casualties, and the length of the perpetrators' imprisonment. In cases where terrorists are killed, their families receive monthly stipends—a policy Israel has vehemently opposed and sought to penalize.
Pushing against unilateral Palestinian statehood, Israel's finance minister Bezalel Smotrich announced his intention to immediately halt the transfer of all monthly tax revenues that Jerusalem collects on behalf of the Palestinian Authority, moving to collapse the PA economy. pic.twitter.com/JgenMM0J0K
— Jewish News Syndicate (@JNS_org) May 22, 2024
The 1994 Paris Protocol, a transitional arrangement agreed upon by the Palestine Liberation Organization and Israeli authorities, grants Israel the authority to withhold these funds. Palestinian officials, however, accuse Israel of exploiting this arrangement to exert economic pressure, conveniently ignoring that they negotiated and agreed to these terms. This protocol was part of a framework intended to culminate in a Palestinian state by 1999—a goal derailed by Yasser Arafat's rejection of Prime Minister Ehud Barak's offer at Camp David and the subsequent intifada.
US National Security Adviser Jake Sullivan criticized Smotrich’s move, claiming it undermines the quest for stability and prosperity in the West Bank—a term he uses instead of the historical names Judea and Samaria. Sullivan's comments reflect a contentious international discourse on the region's future.
Many Israeli politicians, particularly from the right, argue that Israel should not transfer funds to the PA, which they accuse of supporting and enabling terrorism. The PA's failure to police militant groups within its territories and its complicity in their actions further justifies withholding the funds, according to these lawmakers.
In January, Israel's cabinet approved the transfer of frozen Palestinian tax funds to a trust fund managed by Norway, under stringent conditions. Israel insisted that none of this revenue be directed to Gaza, focusing instead on Judea and Samaria, which many Western nations and Israeli security officials warn is on the brink of collapse. Such a collapse poses a significant risk to Israel's security, according to the US administration.
Israeli Finance Minister Bezalel Smotrich orders the continued halt in transfers of tax revenue from the Palestinian Authority & to redirect it to families of terror victims.
— Natalie Z (@natalie_Zion_) May 4, 2023
“The state of Israel is stopping the financing of terror by the Palestinian Authority,we won't let this.. pic.twitter.com/ztNWkJGXXG
Since the outbreak of the Gaza war in October, the PA, a major employer in the West Bank, has struggled to pay full salaries. The PA now faces another looming threat: the potential termination of a crucial waiver allowing Israeli banks to cooperate with Palestinian banks, essential for paying PA salaries and importing goods and utilities. This arrangement also facilitates the disbursement of terror rewards and the enrichment of the Palestinian leadership, already immensely wealthy by regional standards.
Janet Yellen has warned that Israel's move risks triggering a "humanitarian crisis," highlighting the complex and high-stakes nature of this economic and political conflict.
