Israel passes law to deduct Palestinian tax revenues

The Israeli Knesset has approved a law allowing the confiscation of funds from Palestinian clearance revenues, a move that is expected to deepen the Palestinian Authority’s (PA) financial crisis. Clearance revenues are taxes on goods imported into Palestinian areas, collected by Israel on the PA’s behalf. Since 2019, Israel has deducted sums from these revenues under various pretexts, leaving the PA unable to pay full salaries.

Legislative formalisation

The Knesset announced Tuesday that the plenary approved the bill in its second and third readings on Monday, making it law. The bill stipulates “the deduction of an amount from the funds transferred by Israel to the Palestinian Authority each year, as determined by the Ministerial Committee for National Security Affairs, based on a report submitted by the Finance Minister (Bezalel Smotrich).” While Smotrich had already been deducting court‑ordered compensation payments to Israelis, the new law turns these deductions into formal legislation.

PA’s financial collapse

Last month, Palestinian Prime Minister Mohammad Mustafa accused Israel of “suffocating” the West Bank through “political, security, and colonial tools, in addition to the continued deduction of Palestinian clearance revenues.” He said Israel has not transferred any tax or customs revenues to the PA over the past 12 months. Under the 1994 Paris Economic Protocol, Israel collects clearance revenues and keeps 3% (about $102 million annually) as a service fee.