Israel to Withhold US$ 138 Million in Palestinian Tax Funds
IndraStra Open Journal Systems
IndraStra Global

Israel to Withhold US$ 138 Million in Palestinian Tax Funds

By IndraStra Global News Team

Image Attribute: Children in Gaza Strip, Palestine / Source: Badwarnat0 (

Image Attribute: Children in Gaza Strip, Palestine / Source: Badwarnat0 (

On February 17, 2018, Israel's State Security Cabinet (SSC) (also known as, הקבינט המדיני-ביטחוני‎, HaKabinet HaMedini-Bithoni) announced that it will withhold over US$ 138.2 million/ 500 million shekels (around 5 percent of the tax handovers) from the Palestinian Authority (PA) for stipends given to families of Palestinians who carried out terrorist attacks against Israelis and later jailed over under Israeli laws or killed by the Israeli forces.

According to the Israel-PLO Economic Agreement (Dated; April 29, 1994/signed as Annex IV on May 4, 1994) — Israel, on a regular basis transfers the tax funds to PA. Currently, an approximate sum of US$ 222 million is collected per month. With negotiations stalled since the 2014 Israel–Gaza conflict, "Israel has at times withheld money as a measure of protest or pressure".

Israel and the United States say the "stipend policy" constituted by PA under "Palestinian Authority Martyrs Fund", and has been criticized as encouraging terrorism against Israel. Palestinian President Mahmoud Abbas describes the slain and jailed Palestinians as "heroes of a national struggle" and describes the money as "welfare support" for their families - the fund traces its origins back to 1964 when it was by Fatah to support the widows and orphans of Palestinian fedayeen.

The decision follows the similar U.S. legislation — H.R. 1164 Taylor Force Act 2018 (which was passed by U.S. Senate and signed into law by U.S. President Donald Trump on March 23, 2018) — under which Americans slashed funding for the United Nations Relief and Works Agency (UNRWA) for Palestine Refugees and for development programs in the Palestinian territories. Consequently, the U.N.'s World Food Programme (WFP) also cut back its services due to funding shortages.

The latest withholding is the outcome of the law which was passed last year by the Israeli parliament, The Knesset —  which stipulates that every year the Israeli defense minister (currently, Prime Minister Benjamin Netanyahu also acts as defense minister) will submit to the SSC a report summarizing the transfer of funds from the PA to prisoners and their families. This sum will be divided by 12, and the result will be withheld from the subsequent monthly transfers of taxes Israel makes to the PA. The legislation which was co-sponsored by MK Avi Dichter (Likud Party) and MK Elazar Stern (Yesh Atid party) was approved on July 2, 2018, as a law with 87 of the 120 legislators voting in favor and 15 opposing. 


"Abu Mazen (Abbas) continues each month to transfer fat salaries to murderers who are in prison," Israeli Justice Minister Ayelet Shaked told Israel's Reshet 13 TV. "We must find a way of stopping this money." She further added, "If he (Abbas) chooses to collapse by keeping up payments to the murderers, then let him collapse."


The Palestinians have condemned Israel's decision as an act of piracy.

"It is an attempt to pressure us and blackmail us," Wasel Abu Youssef, a senior Palestine Liberation Organisation (PLO) official, told Reuters. "Even if left with just one dollar, we will pay it to the families of the martyrs, of the prisoners and of the wounded."


According to the regional experts, this kind of targeted fiscal blows (in the form of withholding) could hamper the hold of PA over Palestinian population and may give an opportunity to Hamas in building its clout.


On February 11, 2018, the Saudi ambassador to Egypt, Osama Nugali, announced that The Saudi Fund for Development deposited US$ 60 million into the account of the Finance Ministry of the Palestinian Authority as a part of Kingdom's monthly contributions to the PA’s budget for November and December 2018, and January 2019. The money was transferred within the framework of Saudi Arabia’s permanent support for the Palestinian cause at all political, economic and humanitarian levels.

Also, last month PA declined annual American funding of US$ 60 million (approx.) for their security forces — "worried about exposure to lawsuits under new U.S. anti-terror laws".