Palestinian Authority to cut civil servant salaries following Israeli tax freeze

The Palestinian Authority will cut salaries for civil servants, the Palestinian finance minister announced on Thursday. The decision comes days after Israel said it would withhold tens of millions of dollars in tax transfers to the PA.

Israel on Sunday froze $138 million of the tax revenues it sends to the PA over stipends given to the families of Palestinians killed or imprisoned by Israel.

Israel, which collects taxes on behalf of the PA under the 1993 Oslo Accords, says the stipends encourage violence.

Palestinian President Mahmoud Abbas said on Wednesday he would accept nothing less than the full payment of tax revenues owed by Israel. He refused to halt payments sent to the families of "martyrs" and prisoners, or prisoners themselves.

The PA says the stipends are a form of welfare for families who have lost their main breadwinner.

The PA will "pay the salaries of civil servants in time, but they will be reduced", said finance minister Shukri Bishara after a meeting with EU representatives in Ramallah, AFP reported.

The PA is already running a deficit, and the tax transfers are the authority's most important revenue source at 700 million shekels ($193 million) a month.

The cuts will not apply to the family stipends or payments given to pensioners, he said. Bishara added that salaries below 2,000 shekels ($550) would not be affected by cuts.

While the Israeli press has described the stipends as payments to "terrorist" families, many Palestinians view those imprisoned or killed by Israeli forces as heroes in the ongoing struggle against Israeli occupation.

The PA wants EU countries to pressure Israel to rescind its decision, said Mahmoud al-Aloul, vice chairman of Abbas's Fatah party.

Palestinians leaders would take steps to boycott Israeli goods in response to the decision, he said, adding they had already prepared "a list of Israeli products that have local equivalents".