Palestine faces financial crisis amid decline in foreign aid, tax dispute

Palestine is facing a financial crisis amid a decline in foreign aid and a growing tax dispute with Israel, according to an informed source.

The Palestinian government, which used to pay its employees before the fifth of every month, is still unable to pay the salaries for July, the source told Xinhua news agency on Monday, adding "the government's financial situation is so difficult".

One main reason behind the crisis is that Israel keeps deducting its tax revenue dues to the Palestinian government per month, the source said.

According to an agreement between the two sides, Israel collects taxes from Palestinian trade that goes through Israeli-controlled ports and crossing points, and then it pays the taxes back to the Palestinian government every month.

In July, Prime Minister Mohammed Ishtaye warned that the Israeli deduction from the tax revenue dues would put the Palestinian Authority in a difficult financial situation.

Official Palestinian sources had earlier said that since 2019, Israel has deducted a total of $851 million from the tax revenue dues which should be paid back to the Palestinian Authority.

Meanwhile, the lack of international funds has aggravated the financial crisis in Palestine.

In 2021, the total international aid that the treasury of the Palestinian Authority received amounted merely to $30 million, according to a statement by the Finance Ministry.

"The tax deduction from Israel is not new, since it has been deducting tax revenue dues since 2019. What new is the lack of European aid, which amounts to around $600 million annually," Abdel Karim, a Ramallah-based economist, told Xinhua.