Israel’s Dispute with Palestine: Withholding of Tax Revenues and Salary Payments

The Israeli government has transferred 435 million shekels ($116 million) in withheld tax revenues to the Palestinian Authority, marking the first such transfer since April. Under a long-standing arrangement between the two sides, Israel collects taxes on goods passing through it to the West Bank on behalf of the Palestinian Authority and transfers the revenues to Ramallah.

However, Israeli Finance Minister Bezalel Smotrich had been withholding funds for administrative spending in Gaza since the war began on October 7. In addition, Israel was deducting money for electricity, water, and the cost of treating Palestinians in Israeli hospitals. Palestinian officials claim that the amount transferred is much less than the taxes collected each month after these deductions.

Smotrich opposed sending the money to the Palestinian Authority, as the funds are used to pay public sector salaries, and he accused the Palestinian Authority of supporting the attack on October 7. Currently, the Palestinian Authority pays only 50 to 60 percent of salaries and Israel also deducts money equivalent to the total of the so-called martyrs’ allowances paid to the families of fighters and civilians killed or imprisoned by Israel.

Last week, Smotrich agreed to transfer the funds this month after receiving concessions from