Palestinian Authority fears Israeli tax transfer freeze

The Palestinian National Authority will be unable to meet its budgetary obligations if Israel again stops the transfer or tax payments from Palestinians, which make up two thirds of the monthly earnings of the Authority, the PNA said on Saturday.

On Friday, Israeli Finance Minister Yuval Steinitz said Israel was ready to stop transfer of tax revenues to the Palestinian authority from the beginning of next week, if there was a declaration of formation of a “national unity” government as part of an agreement between the Palestinian HAMAS and Fatah movements.

PNA representative Hassan Al-Khatib said the PNA had requested financial help from the Arab League if Israel carried out its threat, but it had received no reply.

In accordance with the Oslo agreement of 1993, the Israeli government is obliged to transfer tax payments from Palestinian workers, following conclusion of an agreement between Palestinian and Israeli businesses.

The sum of these payments is more than $100 million a month, and allows the PNA to pay state employees, who number more than 160,000 people.

Israel froze tax transfers for more than ten days at the beginning of May, after an initial agreement was signed between HAMAS and Fatah, but then rescinded the freeze after pressure from the international community.

Steinitz justified the threat to renew the freeze on tax transfers by saying that the funds could be used to support “Palestinian terrorists” in the even of formation of a Palestinian national unity government.

The Palestinian HAMAS and Fatah movements signed an accord in Cairo on May 4, under which elections are to be held for formation of a unity government. The agreement envisages a government will be formed of independent candidates, who will prepare for presidential and parliamentary elections within six months under the aegis of the UN, the Arab League and other international organizations.

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