Is the Palestinian Authority faking its financial crisis?

The PA’s total revenue is rising – even after Israel froze taxes. Why is it still in a ‘crisis’? PMW reveals numbers that tell all.

The Palestinian Authority (PA) is currently facing a financial crisis, the World Bank reported.

The crisis, however, is self-induced and caused as a direct result of a decision by PA Chairman Mahmoud Abbas to drag the Palestinian economy into an abyss, in order to preserve the PA’s policy of encouraging terror and rewarding terrorists with generous salaries.

The sole reason for the economic crisis is the refusal of the PA to accept the tax revenues that Israel collects and transfers to the PA. These tax revenues – over 8 billion shekels in 2018 – account for, on average over the last five years, 50% of the PA’s annual operating budget.

The PA is refusing to accept the taxes due to the decision of the Israeli Security Cabinet, taken in February this year after the rape and murder of Ori Ansbacher, to deduct 502 million shekels (in twelve equal deductions each in the sum of approximately 42 million shekels) from them. The amount the government decided to deduct is the amount that the PA publicly admitted that it paid in salaries and various benefits to imprisoned terrorists and released terrorists in 2018.

The refusal of the PA to receive the remaining amount of tax money was made clear immediately after Israel’s decision to deduct the funds, as explained by Riad al-Maliki, Palestinian Authority (PA) official in charge of foreign affairs:

In the video, al-Maliki can be heard saying, “It was agreed yesterday in a meeting with His Honor the President [Abbas] to send an official message to the Israeli side, according to which we will not agree to accept any partial amount of the tax money that is to be officially transferred to the Palestinian side. This message has been conveyed to the Israeli side in a clear manner.” [Official PA TV, Feb. 21, 2019]

Even if it were possible to argue that specifically the deducted funds caused the economic crisis, figures obtained by Palestinian Media Watch (PMW) following a request to the Ministry of Finance under the Freedom of Information Law prove that even after Israel deducted from tax transfers the amount the PA spends on salaries to terrorist prisoners, the PA would have still received more money in the first two months of 2019 than it received on average per month in 2018. Tax revenues in the first two months of 2019 increased by a total of 109 million shekels, while the amount of the deduction was only 42 million shekels – a positive difference in favor of the PA of 67 million shekels.

In January 2019, before the Cabinet’s decision to make the deduction, the taxes collected for the PA amounted to more than 743 million shekels, and in February, the taxes collected amounted to more than 728 million shekels.

In 2018, the tax revenues amounted to an average of 670 million shekels per month. In other words, even after deducting the 42 million shekels, the tax revenues in February totaled more than 686 million shekels, 16 million shekels more than the monthly average in 2018.

Credit: Palestinian Media Watch

Abbas’ decision to refuse the tax revenues from Israel is based on the PA’s basic principle that the terrorists – all of them, without distinction between stone throwers and murderers, between members of Fatah or Hamas or Palestinian Islamic Jihad or the Popular Front for the Liberation of Palestine, etc. – did not carry out acts of terror but only did what the PA “ordered them to do”:

PA Chairman Mahmoud Abbas: “I demand [the release of] prisoners because they are human beings, who did what we, we, ordered them to do. We – the [Palestinian] Authority. They should not be punished while we sit at one table negotiating. Besides, they spent many years in prison. How much longer? Do they have to spend all their life in prison and even die there?” [Official PA TV, Feb. 14, 2005]

The PA goes even further when it sees the terrorists – all of them – as their “soldiers.” Nabil Abu Rudeina, Deputy Chairman and the PA official in charge of information, recently reiterated this position in a meeting with Israeli journalists. Referring to the financial crisis and the demand that the PA stop paying the salaries of the terrorists Abu Rudeina said:

“This is a red line and Israel needs to understand this. It is impossible to send a soldier to war and then not take care of his family. We are talking about someone who acts on our behalf and receives orders from us.” [Kan (Israeli TV), April 16, 2019]

Recently, Abbas himself defended the policy of paying salaries and explained:

PA Chairman Mahmoud Abbas: “We have been paying salaries to the families of the Martyrs, to the prisoners, and to the wounded since 1965. This is because they were killed, imprisoned, or wounded because of a national interest and for the sake of a national interest, and not for personal reasons.” [Official PA TV, April 21, 2019; speech at the Arab League conference in Cairo]

It was this dogma – to see murderers and other terrorists as soldiers of the PA – that brought the PA to institutionalize and establish, even in legislation, the entitlement of imprisoned and released terrorists to receive a monthly salary. It is this dogma that is behind the PA terrorist pay scale according to which the longer the terrorist is held in prison (similar to the worker who accumulates seniority in his workplace), the higher his salary.

It is now being argued that the PA is in danger of economic collapse only because of Israel’s implementation of the law to deduct from the tax revenues. This claim is baseless. The PA’s financial crisis is not the result of the deduction of the funds by the Israeli government. The financial crisis is a direct result of the decision of the PA to insist not only to continue to encourage terror and reward terrorists but also to demand that the State of Israel be a partner to this pugnacious policy and allow the PA to make the payments out of the tax revenues that Israel collects and transfers to it. It is also the result of the PA leadership’s own decision to cripple the Palestinian economy – all in order to continue to paying generous salaries to terrorists.

It is important to remember, that while there were various proposals during the legislative process what to do with funds that were deducted from the PA taxes, the final decision was that the funds would be temporarily “frozen” and returned to the PA if it abolishes its policy and stops paying salaries to the terrorists.

The law that authorizes the deduction is the “Law to freeze money that the Palestinian Authority has paid in connection with terrorism from the money transferred to it by the government of Israel, 2018.” The law was widely supported by the coalition and the opposition.

According to the law, the defense minister is supposed to prepare an annual report on PA payments transferred to imprisoned terrorists, released terrorists, wounded terrorists and families of killed terrorists (so-called “Martyrs”). After the approval of the report by the security cabinet, the Israeli government will deduct the amount the PA spent on payments to terrorists in the previous year from the taxes that Israel collects and transfers to the PA in the current year.

It is also important to note that the new law allows for the deduction not only the funds paid by the PA to imprisoned terrorists and released terrorists, but also the deduction of funds paid by the PA to wounded terrorists and families of dead terrorists. However, since the amount of the PA payments of this group has not yet been ascertained, the Cabinet has not yet decided to deduct them from tax revenues.

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