Israel Plans to Use PA Tax Revenue to Pay Debt to Electric Company

By Steven Scheer

JERUSALEM (Reuters) – Israel intends to use tax revenue collected on behalf of the Palestinian Authority (PA) to settle its nearly 2 billion shekel ($544 million) debt to the state-run Israel Electric Co (IEC), Finance Minister Bezalel Smotrich announced on Sunday.

Israel collects taxes on goods passing through to the West Bank for the PA, transferring these revenues under a long-standing arrangement. Since the Hamas-led attack on Israel on October 7, 2023, which sparked the ongoing war in Gaza, Smotrich has withheld 800 million shekels designated for administration expenses in Gaza.

According to Smotrich, these frozen funds are held in Norway and will instead be used to pay the IEC debt of 1.9 billion shekels. He referenced Norway’s unilateral recognition of a Palestinian state as part of the rationale for this decision.

Smotrich expressed that the PA’s debt to IEC has resulted in high loans and interest rates, affecting the credit of IEC and subsequently impacting Israeli citizens economically.

The Palestinian Finance Ministry indicated it permitted Norway to release a portion of funds held since January—amounting to 1.5 billion shekels—labeling the funds as punitive due to the government’s financial backing for Gaza. As a result, 767 million shekels will be allocated for Israeli fuel companies for upcoming fuel purchases, while a comparable amount will address electricity debts owed to IEC by Palestinian distribution companies.

Smotrich opposes sending funds to the PA, accusing them of supporting the October 7 attack led by Hamas. Currently, the PA is paying only 50-60% of its public sector wages. Israel also deducts funds equivalent to the “martyr payments” made by the PA to families of militants and civilians harmed by Israeli actions.

The Palestinian Finance Ministry mentioned that 2.1 billion shekels remain withheld by Israel, totaling over 3.6 billion shekels as of 2024. Israel has begun deducting an average of 275 million shekels monthly from its tax revenues since October 2023, which equals the government’s monthly allocations for Gaza, contributing to the ongoing financial crisis.

The ministry is collaborating with international partners to expedite the release of these funds.

($1 = 3.6763 shekels)