Bethlehem- For the third month in a row, the Palestinian government is deducting part of its employees’ salaries, due to what it says is a financial crisis it is going through, for several reasons, including Israel’s deduction of part of the tax clearance funds it collects for the Palestinian Authority, and the delay in foreign financial aid.
The economic relationship between Israel and the Palestinian Authority is still based on the Paris Protocol, which is the economic annex to the Oslo Agreement, signed between Israel and the Palestine Liberation Organization in 1993.
However, this protocol is supposed to be for a limited period since the signing of the agreement and ends in 1999, so how is the economic relationship between Israel and the Palestinian Authority going so far? What is the money exchanged between the two parties? Can the Palestinians economically disengage from Israel as an occupying state?
What are the Authority’s financial revenues?
Foreign aid constituted between 50-60% of the Palestinian Authority’s revenues during the first years of its establishment, which was funded by European and Arab donor countries, but during the past few years it has no longer exceeded 20%.
Over the past few years, the Palestinian Authority’s budget has approached $5 billion, and the Authority suffers from scarcity of revenues, whether due to the decline in the value of foreign aid, or the decline in internal revenues, especially taxes.
Economists believe that the most important component of the authority’s tax revenues is the value-added money on imported goods, and customs money on the importer. The share of taxes constitutes approximately 70% of the Palestinian Authority’s budget today.
What are the most prominent provisions of the Paris Economic Protocol?
The Paris Economic Protocol defines the economic relationship between Israel and the Palestinian Authority, and its most prominent provisions include:
- Determining the goods that Palestinians import, the most important of which is preventing goods that are considered inputs to production processes.
- Determining the quantities of water given to the Palestinians from their land, which experts believe is no longer enough today even for drinking, so how can they obtain water for economic development, whether for agricultural or industrial uses?
Because Israel controls the crossings and borders, it therefore controls all Palestinian exports and imports that must pass through them.
The economic protocol stipulates that 3% of tax funds be deducted for the benefit of Israel, which collects these funds and hands them over to the authority.
Also according to the protocol, tax funds are valid for up to 6 months from the date of their issuance, after which the Palestinians lose the legal right to claim them.
Israel is required to be the primary control in import and export operations, according to the protocol, and today Israel controls 88% of Palestinian exports, and it controls between 54% and 57% of Palestinian imports.
There are provisions in the protocol related to customs, monetary transactions, retirement, workers, trade, tourism projects, funds for road victims, and others.
Majdi Al-Jaabari believes that the Paris Economic Protocol is the most dangerous economic agreement that has shackled the Palestinians, because it stifles development, kills the Palestinian economy, and limits its growth and development.
What’s wrong with the agreement?
Dr. Majdi Al-Jaabari, professor of financial and accounting sciences at Hebron University, in the south of the occupied West Bank, believes that the Paris Economic Protocol is the most dangerous economic agreement that has shackled the Palestinians, because it stifles development, kills the Palestinian economy, and limits its growth and development.
Also, according to Al-Jaabari, the agreement prevents the optimal use of natural resources in the Palestinian territories, especially in… Areas classified as “C”, Which constitutes 63% of the total territories occupied in 1967.
As for Thabet Abu Al-Rous, a member of the General Union of Palestinian Economists, he believes that the most prominent problem with the agreement is the single customs cover, which prevents the authority from moving more than two degrees within the rate imposed in Israel.
Meaning, if the tax rate in Israel is 16%, the authority may not fall below 14% or exceed 18%, and here the difference appears in the income levels of the Israeli and Palestinian citizens, which reflects negatively on the latter.
What is the dark side of the economic agreement?
Abu Al-Rous believes that the other dark side of the agreement is Israel’s control over the crossings, and thus control over the collection of Palestinian taxes.
Abu Al-Rous says to Al-Jazeera Net: Until this moment and over the years, the Israeli side has not disclosed to the Palestinian side any details about the financial numbers according to which the Palestinian Authority receives the clearance funds, and Israel only gives a final financial number that it deems appropriate without the details.
Today, clearing constitutes no less than 68% of the Authority’s revenues, meaning it is the largest source of these revenues.
The problem with this also, according to Abu Al-Rous, is that without an audit of the value of these funds, and documents and supporting documents for their details, the authority cannot plan for the future, or prepare estimated budgets, given the control of its financial resources from the Israeli side.
The other problem – according to the same speaker – is that Israel deducts water and electricity debts, and if it wants, it deducts part of the clearance funds it collects for the authority, such as deducting the salaries of prisoners and the families of martyrs, which has raised a problem in the recent period.
Abu Al-Rous adds, “The authority cannot object to this for more than 6 months, because after that, according to the agreement, if it does not receive the clearance funds from Israel in any form, they are considered void and it has no right to claim them.”
He explains that, given the provisions of the Paris Economic Protocol, the economic connection between the Authority and Israel is close and cannot be removed, indicating that the regulations and laws in the Palestinian Authority were built on the basis of this agreement, and therefore it is difficult to separate from the reality of the Palestinian economy’s dependence on Israel.
What is the solution?
Majdi Al-Jaabari told Al Jazeera Net, “Tax money today constitutes an Israeli method of blackmailing the authority. On the other hand, the authority is moving towards easier solutions to resolve this blackmail by deducting part of employees’ salaries.”
According to Al-Jaabari, it is better for the authority to cut back on unnecessary expenses, fight financial and administrative corruption to reduce the deficit it suffers from, and reduce its financial spending on the Palestinian Foreign Ministry and diplomacy, which is not fulfilling the role assigned to it of clarifying the justice of the Palestinian issue to the world first, or mobilizing efforts. Financial support for Palestinian steadfastness on their land.
He believes that the ideal solution is to completely cancel the Paris Economic Protocol, because the Israelis do not adhere to it and are using it to their advantage, and he confirms that the Palestinian side clings to this protocol because of the weakness and weakness it has reached.
Al-Jaabari said that this agreement limits the development of the Palestinian economy, considering it a twist of the arm, a siege, and a restriction of the movement of the Palestinian at the checkpoints and in the settlements to discourage him from defending his right to his land, his homeland, his capabilities, and his freedom from the Israeli occupation.
