Israel to withhold tax funds from Palestinians for terrorist payments

The Israeli security cabinet has announced that it will withhold $43.7 million in tax handovers to the Palestinian Authority (P.A.), over its so-called “Martyr’s Fund” for imprisoned Palestinians or the families of deceased Palestinians who commit terrorist acts.

According to the top Israeli ministers, last year the Ramallah government of P.A. President Mahmoud Abbas paid out 150 million shekels ($43.37 million) to reward Palestinians who murdered or attacked Israelis through its derisively-known “pay to slay” program – which is the same exact amount they intend to trim from taxes collected on behalf of the P.A. this coming year.

“That party is over,” wrote Deputy Israeli Defense Minister Avi Dichter on Twitter after the decision, underscoring that “For too long, we allowed the P.A. to pay salaries to terrorists.”

Israel collects taxes for the P.A. in accordance with the 1990s interim peace accords, currently valued at about $222 million a month. Negotiations between the two sides have remained at an impasse since 2014, and Israel has occasionally withheld the transfer of the funds as a measure of protest or pressure.

A similar measure was undertaken last February, when Israel withheld $138 million – equivalent to previous prisoner payouts by the Ramallah Palestinian government. The P.A. retaliated by boycotting all tax handovers for more than half a year, triggering concern the entity might bankrupt itself.

The total amount of withheld funds is now believed to be around 6.8% of tax funds due to the P.A., reflecting about 50% of its annual budget.  Following a cabinet meeting of Palestinian ministers in the West Bank city, P.A. Prime Minister Mohammed Shtayyeh said Israel’s “will send us back to a new place in crisis which we have tried to overcome in management of public funds.”

Both Israel and the United States argue that the P.A. incites more violence against Jews with the payment scheme, which is scaled to give exponentially higher monthly payouts for prisoners who serve the longest jail terms for committing heinous offenses.

On 23 March 2018, U.S. President Donald Trump signed the Taylor Force Act into law, that cut close to a third of all American foreign aid to the P.A. until it ceased the payouts. The law takes its name from a U.S. military veteran, who was murdered while visiting Israel by a Palestinian terrorist in 2016. Also in 2018, Washington suspended more than $200 million in direct aid to the P.A. and stopped its annual donations of $300 million to the United Nations Relief and Works Agency for Palestinian refugees.

The U.S. Anti-Terrorism Clarification Act came into effect in 2019, which enabled American citizens to file lawsuits against recipients of U.S. foreign aid over alleged complicity in “acts of war.” Subsequent concern over future litigation paved the way toward the severance of all USAID to Palestinians in the West Bank and Gaza, and more than $60 million in annual support for the Palestinian security services

Despite the steep penalties imposed by Israel and the U.S., Palestinian President Abbas has vowed to continue the payment to Palestinian inmates incarcerated in Israeli prisons and those who died committing terrorist acts as “heroes” of a national struggle.

Reacting to the Israeli cabinet decision, Abbas told members of his Fatah party in Ramallah that such efforts are part of the price Palestinians pay for their international struggle against Israel. “This will cost us a lot and it started costing us already,” he said, while stressing “we have rights and we will not be afraid.”