Palestinian Authority refuses tax revenues from Israel

The Palestinian Authority on Wednesday said it rejected its regular monthly tax transfer from Israel to protest an Israeli decision to deduct sums of money the PA pays to the families of people killed, injured or imprisoned for attacks on Israel.

Israel announced last week that it would withhold over $138 million in revenues to punish the Palestinian leadership for paying stipends to Palestinian attackers and their families.

Under interim peace deals, Israel collects customs duties and other taxes on behalf of the Western-backed Palestinian Authority, and transfers the funds to the Palestinians each month. These transfers cover roughly two-thirds of the Palestinian government budget.

The freeze of these funds will deal a dire financial blow to the cash-strapped Palestinian leadership, already weakened by the recent US cuts of more than $200 million in bilateral aid. The authority expects it won't be able to pay its employees' full salaries.

The PA makes a variety of social payments to the relatives of Palestinians detained by Israel or killed in violence, whether they were carrying out attacks or shot dead by Israeli military forces.

The payments can be a key source of income for families, who have in many cases lost their main breadwinner.

Israel says the stipends to prisoners’ families encourage violence.

Although the rejection of the funds is likely to hurt them, the Palestinians are hoping that the move will put pressure on Israel to reverse course.

A collapse of the Palestinian Authority could lead to the end of security cooperation with Israel, and theoretically force Israel to assume responsibility over the more than two million Palestinians in the occupied West Bank.

Israel currently detains some 6,500 Palestinians for a range of alleged offences and crimes, with detainees considered political prisoners in Palestinian society.

Agencies contributed to this report.