Israel’s deduction from the tax clearance revenues, which it collects on behalf of the Palestinians, increased by 13% during the first ten months of 2015, in comparison with that of the same period last year.

Asma Marzouq – Palestine Economy Portal

Translated by: Tamara Barakat

The financial statements issued by the Palestinian Ministry of Finance reveal that the amount of money deducted by Israel from the clearance revenues as “net lending” reached more than one billion and two million NIS ($257 million) during the first ten months of 2015.

This deducted amount forms 9.1% of the Palestinian Government’s expenditures during this period. The deductions increased by 4.8% in comparison with those of last year, which amounted to 955.8 million NIS.

The net lending is the amount of money that Israel deducts every month from the tax clearance revenues, before transferring them to the Palestinian Government, in order to cover the electricity, water, and wastewater bills due on the Palestinian government. The money is also used to cover the bills of medical transfers from the Palestinian Ministry of Health to Israeli hospitals.

The net lending does not include the other 3% deducted by Israel from the clearance revenues in return of carrying the “service” of levying the taxes on behalf of the Palestinian Government, as stated in one of the provisions of the Paris Protocol on Economic Relations.

Data shows that the actual net lending deductions exceed the projected deductions stated in the budget by 125% during the first ten months of 2015.   Last year, the actual deductions exceeded the projected deductions by 170%, with an amount of a billion and twenty-two thousand NIS.

The economic researcher, Mouayad Afaneh, says that this is a very dangerous item in the budget, especially since Israel does not provide the Palestinians with specific details and clear statements about the deducted money. He expects that the deductions will exceed over a billion and two-hundred thousand NIS by the end of this year.

Afaneh further adds that although the deducted money is an obligation due on the Palestinian Government, the deduction of the money from the clearance revenues before their transfer and without the provision of clear details and statements is an act of piracy, and it hinders the Ministry of Finance’s ability to collect taxes and financial obligations.

Israel’s deductions from the tax clearance revenues started in 1997 when the Palestinian Ministry of Finance commissioned its Israeli counterpart to deduct an amount of money to cover the electricity bill of the Gaza Strip, followed by another commission to deduct money to cover the water bills of the West Bank and the Gaza Strip. The deductions amounted to $150 million at that time.

The deductions have been exponentially increasing, reaching their peak during the period of Hamas’ Government. They amounted to $376 million in 2006, forming 22% of the overall public expenditures. In 2007, they increased to $535 million, for Israel deducted extra money to cover the fuel bills owed to Israeli companies.

The beginning of 2015 witnessed a crisis over the net lending. President Mahmoud Abbas refused to receive the clearance money, which Israel had withheld for more than a month, because great of amounts of money were deducted from it without giving any explanations. He also threatened that he would raise the issue to the International Criminal Court.

(Palestine Economy Council)