Tuesday, September 26, 2017

Will Israel‘s freeze of Palestinian tax revenue bring unintended consequences?


By Mona Martin - January 20, 2015
TAGS:
Section: [Main News]
Tags: [Palestinian Authority] [Oslo Accords]

Drawing by Latuff.

Shortly after Palestinian Authority President Mahmoud Abbas announced his decision to join the International Criminal Court on 31 December 2014, Israeli Prime Minister Benjamin Netanyahu threatened to once again freeze the distribution of Palestinian income taxes collected by Israeli authorities. Twelve days later, after both sides have acted on their threats, Israel is weighing further measures to punish the PA for its repeated attempts to pressure Israel through unilateral actions in the international legal arena rather than acquiescing to another round of US-lead peace talks. 

Abbas' bid to join the ICC was accepted and confirmed by UN General Secretary Ban-Ki Moon, and Palestine will officially become an ICC member as of 1 April 2015. This is a big success for the PA, and an important step toward the international community’s recognition of Palestine as a state. First and foremost though, ICC membership brings the hope of being able to officially convict Israel of its alleged crimes committed against Palestinians in the occupied territories. 

Retaliatory Israeli sanctions, however, may potentially land the PA in a difficult spot with unpredictable consequences. The half a billion shekels ($128 million) now stuck with the Israelis is nearly equal to the amount the PA spends monthly on employee salaries. It is therefore essential for keeping the Palestinian public services up and running, and maintaining the as of now somewhat stable situation in the West Bank. For the moment, the PA has vital access to emergency financial sources that, in case the freeze is not lifted soon, will be able to step in and fill the growing deficit in PA coffers. Saudi Arabia, for example, increased its $14 million financial support to the PA to $20 million in reaction to Israel’s tax freeze. At the same time, India intervened and donated $4 million along with a statement underlining its position of support for an independent Palestinian state. 

The Arab League has pledged an additional $100 million to help prop up the PA. Whether the group will comply with its promise of acting as financial safety net remains to be seen, as the body has a history of balking at its pledges. Iraq, at least, has made the first step and donated $28 million last week, underlining its support for the Palestinian cause.

While emergency funds from Arab and international donors are surely helpful in the short run, they are by no means a long term solution. Even more so as there is at least one other important donor to be taken into account: The United States. Although it has condemned Israel’s freeze of Palestinian tax revenues, the US is now considering canceling the $400 million in aid it provides annually to the PA, as the payment was linked to the PA’s promise not to join the ICC. Noticeably – but not unexpected – the billions of dollars that flow toward Israel every year are not a topic of discussion, despite the ongoing violations of agreements regarding settlement construction. 

As a consequence, and despite widespread willingness of the international community to financially prop up the PA, Israel’s continued freeze of Palestinian tax revenues may potentially threaten the stability the PA provides as the largest employer in the West Bank. A continued inability to pay its employees would rob thousands of families of their means of existence, which could lead to massive instability. 

By withholding much needed tax revenues from the PA, Netanyahu risks an escalation of the already tense relations between Israel and the Palestinian Authority. Attempts to appease his hardliner constituents may help him in the upcoming Israeli elections scheduled for March, but the possible consequences of Netanyahu’s political expediency could be grave. 

 

 

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