Hebrew Economic Newspaper Reveals Details of Palestinian Clearing and Israel's Benefits from It

SadaNews Economy Translation - The Hebrew economic newspaper Globes reported on Thursday that the number of Palestinian workers inside Israel has decreased from 100,000 to about 8,000, while it has dropped in West Bank settlements from 40,000 to 10,000.

According to the newspaper, as translated by the SadaNews Economy section, this was supposed to lead to a significant reduction in income taxes that Israel transfers to the Palestinian Authority. However, in reality, there was a substantial jump in 2024.

According to the newspaper, under the Paris Economic Agreement annexed to the Oslo Accords, taxes collected by Israel and transferred to the Palestinian Authority constitute about 65% of its budget. This money is collected from workers legally within Israel or the settlements, who pay income tax on their salaries.

According to the agreement, Israel transfers 75% of the income tax paid by Palestinian workers legally in Israel and 100% of the income tax from workers in the West Bank settlements.

Official Israeli data shows that the total income tax transfers to the Palestinian Authority amounted to 206.6 million shekels in 2019, then decreased the following year due to the impacts of the Corona pandemic to about 76.2 million shekels, before jumping to approximately 260 million shekels in 2021 and around 188.1 million shekels in 2022.

Due to the outbreak of war, 2023 saw a relatively expected drop to about 123.3 million shekels. However, the first ten months of 2024 appear contradictory; during this period alone, when the number of legal Palestinian workers in Israel was significantly lower, the total income tax transfers to the Palestinian Authority nearly doubled compared to the entirety of 2023, reaching about 237.5 million shekels.

The newspaper states, as translated by the SadaNews Economy section, that this means that in 2023, prior to October 7, an average of 880 shekels was collected for each employee, while in 2024 the average is 13,198 shekels.

According to an investigation conducted by the Hebrew economic newspaper Globes, this is attributed to the transfer of income tax funds owed on Palestinian workers in the settlements during the previous two years (2022-2023) to the Palestinian Authority in 2024.

Officials in the Ministry of Finance attributed this to the delay in transferring reports from the tax authority to the Palestinian treasury in previous years, and that the deferred payments were issued in 2024, thus transferring three years' worth of payments to the Palestinian Authority in one year.

The newspaper continues: Thus, the amounts transferred from Israel to the Palestinian Authority have risen significantly, specifically during the tenure of Finance Minister Bezalel Smotrich, who personally signed every monthly transfer to the Authority, even though he often speaks in his speeches about freezing payments to the Authority.

Income tax is only one of four tax categories that Israel transfers to the Palestinian Authority, which include import taxes, production tax, and value-added tax.

During the Oslo Accords, Israel agreed to collect Palestinian import taxes, transferring all revenues on goods that have a final destination in the Palestinian Authority territories to Ramallah. As a result, the Authority agreed that Israel would deduct 3% from each transfer to cover administrative costs.

Israeli data shows that from January 2010 to August 2023, Israel collected a total of approximately 43.4 billion shekels from import taxes for the Authority.

The newspaper adds: At the same time, a tax on fuel is imposed. Since 1967, Palestinians in the West Bank and Gaza Strip have received most of their fuel from Israel. In return, Israeli companies import fuel for the West Bank and are required to pay the excise tax, which they then sell under contracts with the Palestinian Authority and registered Palestinian companies.

In the Oslo Accords, Israel agreed to apply the "final destination" principle to fuel as well. Thus, based on reports from Israeli companies and the Palestinian Authority regarding the amount of fuel sold to Palestinians, Israel calculates the amount of excise tax collected and transfers it to the Palestinian Authority.

Data shows that this amount reached approximately 33.9 billion shekels between January 2010 and August 2023.

While the value-added tax that Israel agreed to waive for the benefit of the Palestinian Authority during the Oslo Accords shows that Israel has collected about 28.8 billion shekels for the Authority during the aforementioned period.