Israel continues to withhold billions of shekels in Palestinian funds

The Israeli government has been illegally withholding billions of Shekels from Palestinian tax revenues, with no plans to return the funds, according to a report by the Palestinian Wafa news agency citing Ministry of Finance data.

The report highlights that since October 7, Israel has withheld 2.83 billion shekels ($765 million), under the pretext that it is allocated for Gaza.

It also states that “Israel has been withholding taxes from goods passing through the border crossing with Jordan for many years.

“The total amount of taxes withheld by Israel over the years has reached 7.26 billion shekels (approximately 2 billion dollars).”

In June, Israel's far-right Finance Minister Bezalel Smotrich , ordered the deduction of $35 million from the tax funds collected by Israel on behalf of the Palestinian government, redirecting the money to Israeli families who were reportedly victims of attacks attributed to Palestinians.

Years-long deduction of utility costs

On average, Israel has been deducting 257 million shekels each month from Palestinian tax revenues as a punitive measure against the Palestinian Authority (PA).

This strategy is aimed at pressuring the PA to stop payments allocated for Gaza, particularly for public employee salaries in health and education, the report said.

From February 2019 to August 2024, Israel has deducted a total of 3.54 billion shekels from Palestinian funds, justifying the deductions as compensation for payments made to the families of those killed and for prisoners.

This equates to an average of 53.6 million shekels per month. Despite ongoing demands from the PA, Israel continues to withhold these funds and refuses to release them.

In addition to these deductions, Israel has withheld 6.36 billion shekels intended for Gaza’s allocations and funds for the families of those killed and for prisoners.

The Israeli government also refuses to transfer the PA’s revenue from exit taxes collected at border crossings to Jordan, which has accumulated to over 900 million shekels. The total deductions withheld by Israel now amount to approximately 7.26 billion shekels.

The cumulative deductions from Palestinian tax revenues used to cover utilities, including electricity, water, sewage, and hospitals, have reached roughly 20.2 billion shekels from 2012 to August 2024.

PA seeks international pressure

Palestinian tax funds, collected by the Israeli Ministry of Finance at about 3% of the total value of goods imported into Palestine from or through Israel, amount to approximately $210 million monthly.

Under the 1994 Paris Economic Protocol, Israel, which controls the border crossings, was responsible for collecting these taxes and transferring approximately $190 million monthly to the Palestinian treasury.

However, Israel has been deducting a portion of these revenues for nearly two years.

The latest World Bank updates reveal that the Palestinian economy is facing severe disruption in the early months of 2024 due to the ongoing impact of the conflict.

With the economic outlook for the year remaining highly uncertain, projections suggest a potential contraction ranging from 6.5% to 9.6%.