Kahlon leak closes path around Deduction Law
Efforts by Israel and the Palestinians to find solutions for alleviating the economic crisis facing the Palestinian Authority had met with some success, but a recent leak meant the end of the road for much-needed additional measures.
It has been about two months since a partial solution was found to the problem surrounding the transfer of tax money collected by Israel to the Palestinian Authority (PA). As it turns out, the danger has yet to pass. The PA remains in dire economic straits.
A security source told Al-Monitor that Palestinian President Mahmoud Abbas and senior members of his administration believe that without immediate improvement in the economic situation on the West Bank, towns there will be overrun by demonstrations led by PA employees, who have only received a portion of their salaries for the past few months. Given the resulting lack of commerce, local businesses will collapse.
It should be remembered that since July 2018, when Israel passed the Deduction Law — calling for the deduction of funds from the tax receipts equivalent to the amount the PA transfers to the families of Palestinian prisoners in Israeli jails and those killed in attacks on Israelis — the PA has refused to accept any of the tax money. With Israeli security forces warning that the PA is on the verge of economic collapse, Finance Minister Moshe Kahlon arrived at a solution in conjunction with PA Civil Affairs Minister Hussein al-Sheikh and Finance Minister Shukri Bishara involving a tax exemption on gasoline that the PA buys from Israel.
The agreement benefited the PA in two ways. First, it could purchase gasoline tax free, and second, it could tax the gas when selling it to Palestinian consumers on the West Bank. As a result of the agreement, Israel transferred some 2 billion shekels ($568 million) to the PA on Aug. 22, and everybody sighed with relief.
