Israel Transfers Tax Revenues to the Palestinian Authority (Updated to December 9, 2020)

Overview

• On December 2, 2020, the Palestinian Authority (PA) said in an announcement that the government of Israel had transferred all the tax revenues to the PA account, a sum of 3.768 billion shekels (approximately $115.6 billion). According to the Palestinian minister of the treasury, the funds will make it possible to reduce the budget deficit to $850 million for 2020 and to help repair the extensive damage done to the Palestinian economy by the Covid-19 epidemic. Most of the funds will be used to pay the salaries and debts of PA government employees and the debts incurred for goods and services from the private sector (mostly to private hospitals and pharma companies).
• According to reports in the Israeli and Palestinian media, Israel will deduct 600 shekels (about $184 million), which covers the amount the PA pays to imprisoned Palestinian terrorists, released terrorists and the families of shaheeds. The 600 million shekels will be deducted in 12 monthly installments of 50 million shekels.
• The Israeli deduction of the funds was condemned by senior figures in the PA, accompanied by public declarations of the PA commitment to pay the prisoners’ allotments. In the meantime, thought is being given, accompanied by administrative preparations, to finding circumventive ways to transfer payments to the terrorists while overcoming Israel’s objections (and American reservations). So far two courses of Palestinian actions can be observed:
• Integrating released prisoners to “work” in PA institutions: released prisoners have reportedly already begun filling out application forms for joining the PA’s ranks. It was also reported that some released prisoners would be “retired,” whether because of personal preference, age, health or education. In ITIC assessment, having the released prisoners integrate into the PA civilian and security institutions is fiction, because many of them do not have the necessary skills and the PA has no real need to inflate its institutions. Moreover, among the released prisoners are operatives belonging to Hamas, the Palestinian Islamic Jihad (PIJ) and other terrorist organizations hostile to Mahmoud Abbas and the PA, so it can be assumed that in practice, the PA will not accept them into its ranks.
• The Palestinian National Bank, under establishment by the PA, continues making preparations to open its doors: according to recent reports the bank is expected to begin operating in January 2021 with an initial capital of $100 million. The bank will serve as a pipeline for the payment of the allotments to imprisoned and released terrorists and the families of shaheeds, and it will manage the terrorist prisoners’ bank accounts. Opening its own bank, in PA perception, will prevent damage to the banks operating in Judea and Samaria by protecting them from Israeli legal measures.

Transferring Tax Revenues^[1]

• On November 17, 2020, the PA announced that ties between the PA and Israel would return to the status quo ante of May 2020, after about half a year of having relations cut off (although not completely). The resumption of ties paved the way for the PA to extract the tax revenues from Israel, thereby easing financial difficulties, which worsened with the Covid-19 crisis.
• On December 2, 2020, about two weeks after the announcement, Hussein al-Sheikh, chairman of the Palestinian Civil Authority, reported that the government of Israel had transferred all the tax revenues to the PA’s bank account, the sum of 3.768 billion shekels (about $115.6 billion) (Hussein al-Sheikh’s Facebook page, December 2, 2020). The PA news agency Wafa quoted the post on Hussein al-Sheikh’s Facebook page (Wafa, December 2, 2020).

• The Israeli media reported that the government of Israel would deduct 600 million shekels (about $184 million) from the tax revenues, the sum paid by the PA to the terrorist prisoners, released prisoners and the families of shaheeds in 2019. According to the report, the sum will be deducted in 12 monthly installments of 50 million shekels (Israeli Kan Corporation, November 29, 2020).
• Shukri Bishara, the Palestinian minister of finance, said the funds would enable the ministry of the treasury to reduce its deficit for 2020 to $850 million. He added that would put the PA’s deficit within a normal range, after it had been expected to reach $1.56 billion. He also said that the tax revenues would help repair the damage done to the Palestinian national economy by the Covid-19 epidemic. According to Bishara, an additional sum of about 100 million shekels would be transferred by Israel after accounts had been settled (Wafa, al-Hayat al-Jadeeda, December 3, 2020). Note: On December 6, 2020, 99 million shekels were reportedly transferred from Israel to the PA.
• Minister Bishara said that in coordination with PA Prime Minister Muhammad Shtayyeh, the distribution of most of the tax revenue funds would be as follows (Wafa, al-Hayat al-Jadeeda, December 3, 2020):
  • 850 million shekels to pay the November salaries of PA employees.
  • 1.2 billion shekels to repay half of the debts to employees for the period between May and October 2020 (debts estimated at 2.2 billion shekels).
  • 600 million shekels to pay private sector providers of goods and services. Most of the money will be paid to private hospitals and pharma companies.
  • 450 million shekels to repay bank loans

The issue of Israel’s deductions

• On February 17, 2020, the Israeli political-security cabinet confirmed a law freezing terrorist funds^[2] and deducting more than half a billion shekels from the tax revenues transferred to the PA. In response PA chairman Mahmoud Abbas announced the PA would forego the funds from Israel, repeatedly stressing the PA’s commitment to transfer payments to prisoners and released prisoners and the families of shaheeds. According to the Israeli media, Israel would deduct 600 million shekels from the Palestinian tax revenues (December 2, 2020), in monthly installments of 50 million shekels throughout 2021.
• Senior PA and Fatah figures strongly denounced Israel’s intention to deduct 600 million shekels from the tax revenue transfer and said the PA was considering suggestions to deal with the issue.
• Interviewed by al-Jazeera, Qudri Abu Bakr, chairman of the authority of prisoners and released prisoners’ affairs, denounced Israel’s intention to deduct money, calling it “piracy.” He emphasized that the Palestinian leadership would not surrender to pressure or blackmail and would not abandon the prisoners. He said integrating prisoners into the PA institutions would serve the prisoners and refute Israel’s claims. He claimed that the prisoners “are freedom fighters and not felons,” adding that “if Israel raises claims of terrorism to steal our money, as of now the prisoners will receive their allotments as public sector employees” (aljazeera.net, December 1, 2020).
• According to the same aljazeera.net article, the PA is committed to paying monthly allotments to about 7,300 released prisoners, a sum of about 50 million shekels (i.e., an average of about 6,850 shekels – a little more than $2,000 – per month per released prisoner). In addition, about 5,000 terrorists are imprisoned in Israeli jails and each one receives 400 shekels to use in the prison commissary (i.e., 2 million shekels – more than $600,000 – per month).

The funds the PA pays to Palestinian terrorist prisoners and released prisoners, circled in red (aljazeera.net, December 1, 2020).

• Qadoura Fares, chairman of the Palestinian prisoners’ club, called deducting the money from the tax revenues “highway robbery” carried out by “the gangs controlling Israel.” He said it was not a deduction because the money belongs to the Palestinians, not to Israel. He claimed that the deduction was one of the aspects of Israel’s [alleged] aggression against the Palestinians in general and not only the prisoners (Gaza post, December 5, 2020).

• Qudri Abu Bakr rejected reports that the PA had stopped paying prisoners’ allotments, stressing the preservation of the rights of the prisoners. He said they could be not abandoned because of a decision made by Mahmoud Abbas. He added that the PA had looked for an alternative legal way to circumvent the Israeli decision to fight the banks paying the allotments to the prisoners and families of shaheeds. They therefore agreed to establish a government bank, which would begin operating in the coming weeks with an initial capital of $100 million. The bank will serve as a kind of government “post office” for paying prisoners without discrimination (Araby Post, December 3, 2020). He added that his aides had attended the meetings of the committee dealing with the establishment of the national bank, which would administer the prisoners’ funds. The committee told them the bank would begin operations in early January 2021, paying the prisoners’ allotments and carrying out all the related banking processes (Sabaq24, December 7, 2020).
• Abbas Zaki, a member of Fatah’s Central Committee, said the PA would continue to demand the 600 million shekels deducted by Israel, either through negotiations or by having the Palestinian’ supporters pressure Israel to make it change its mind. He added that if Israel stubbornly clings to its position, the PA will accept full responsibility and pay the prisoners their monthly allotments in different ways, through refugee camp committees or the new government bank.

Integrating released prisoners into the PA institutions

The PA is examining creative ways to overcome the difficulty presented by Israel’s deduction from the tax revenues of the funds paid to prisoners. One of the main ways currently being examined is to integrate released prisoners, even if only fictitiously, into the ranks of the PA’s civilian and security institutions and to define the payments as “allotments.” On December 7, 2020, the London-based daily paper al-Sharq al-Awsat reported that released prisoners had already begun to fill out application forms for employment in Palestinian ministries, authorities and [security] services. In Palestinian perception, the objective is to end the disagreement between the PA on the one hand and Israel and the American administration on the other over the money paid to released terrorist prisoners.

• Hasan Abd Rabbo, media advisor for the prisoners’ affairs authority, related to the issue in an interview with al-Sharq al-Awsat on December 7, 2020. He said prisoners had begun filling out application forms which included they personal information, education and health, in a process that was liable to be long, to integrate them into the PA’s institutions. Some, he said, would be hired, others would be retired [i.e., they would be paid a fictious pension by the PA institutions]. It depended, he said, on the personal preference, education, health and age of the released prisoners. He claimed the objective was to undermine Israel’s accusations that the PA uses the funds to support terrorism, an argument, he claimed, the Israelis had convinced the Americans to accept. He added that the idea of employing former prisoners was not new. The EU supports and funds earlier plans to rehabilitate prisoners by employing them, and many of them are, he claimed, in fact employed.
• According to an al-Sharq al-Awsat article, there are reportedly 7,400 released prisoners who spent more than five years in an Israeli jail and who receive at least 2,000 shekels (about $615) per month from the PA (depending on how long their prison sentences were). There are currently about 5,000 Palestinian prisoners in Israeli jails who receive allotments according to the number of years of their incarceration. Their starting allotments are 4,000 shekels (about $1230) per month. Anyone who served or is serving a term of more than 20 years receives a salary of between 8,000 (about $2460) and 12,000 shekels (about $3,695) a month. By turning the prisoners into PA employees, their allotments will be formally accepted as allotments and given legitimacy in the eyes of the international community, or anyone who accepts Israel’s position (al-Sharq al-Awsat, December 7, 2020).

^[1] For further information, see the November 26, 2020 bulletin, "The Palestinian Authority is looking for creative ways to continue transferring payments to terrorist prisoners and to families of shaheeds, circumventing Israeli opposition." ↑
^[2] The law was passed by the Knesset on July 2, 2018 to reduce terrorist activity and eliminate its financial incentive by freezing the funds the PA paid for terrorism-related activities. ↑

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