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Israel denies policy change on deducting payouts to Palestinian assailants from PA taxes

The office of Prime Minister Benjamin Netanyahu denied any change in the policy of deducting funds paid by the Palestinian Authority from the tax revenues collected on its behalf by Israel.
Israel's Prime Minister Benjamin Netanyahu speaks as he and U.S. President Donald Trump discuss a Middle East peace plan proposal in the East Room of the White House in Washington, U.S., January 28, 2020. REUTERS/Brendan McDermid - RC26PE94BY08

Israel has stopped in the last three months deducting Palestinian payouts to families of assailants from the tax revenues it is transferring regularly to Ramallah. According to Israel’s public radio Kan, six months ago, former Defense Minister Naftali Bennett neglected to present to the Cabinet a report detailing the sums paid by the Palestinian Authority (PA) to families of Palestinian assailants. Without the report, there was no deduction to be approved. And so Israeli authorities stopped deducting these funds, transferring instead the entire tax revenues it collected on behalf of the PA.

According to the 1994 Paris Protocol signed between Israel and the PLO, Israel is the one collecting tax revenues of imported goods on behalf of the Palestinians. But in 2018, Israel’s parliament adopted a controversial law, enabling it to deduct stipends from tax revenues the PA offers monthly to families of Palestinians imprisoned in Israel or killed while perpetrating an act of terror. Yisrael Beitenu leader Avigdor Liberman and Likud Knesset member Avi Dichter were the ones who pushed the bill, with Liberman labeling it the Pay to Slay law.

When the PA confirmed that this was the case and that it received the full due tax revenues, right-wing parliamentarians became furious. Dichter said the law recommends the prime minister deduct, although it does not force him to do so; this explanation only exasperated tensions. Knesset member Elazar Stern, also one of the people behind the 2018 law, sent an official letter to the Knesset’s Security Affairs Committee chair Zvi Hauser, urgently demanding a meeting on the issue.

At that point, the government realized it must react. The Prime Minister's Office stated on July 3 that the delay in implementing the law was not due to a "change in attitude" and that the government would act according to the law. Another message to the media indicated that the Cabinet will discuss the matter, but no specific date was mentioned. For the moment, it is still unclear why Bennett did not submit the report.

When Israel first introduced the law, Palestinian President Mahmoud Abbas announced he would not accept the deduced sum. In October 2019, then-Finance Minister Moshe Kahlon, together with Palestinian Civil Affairs Minister Hussein al-Sheikh and Palestinian Finance Minister Shukri Bishara, cobbled together a partial solution, which involved granting a tax exemption on gasoline that the PA buys from Israel.

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