Israel close to refunding Palestinian tax money

Date: 13/04/06

After strong lobbying from the EU, the Israeli government appears to have moved a step closer to releasing tax receipts to the Palestinian Authority (PA).

Fearing the financial collapse of the Palestinian Authority, the EU has insisted that Israel restart transfers of value-added tax owed to the PA, worth EUR 50 million each month.

"This is Palestinian money, which cannot be withheld," Javier Solana, the EU's foreign policy chief, recently warned.

Israel suspended the transfers in February following Hamas's electoral victory.

EU diplomats are optimistic that Israel will find a way to release the money and to honour a 1994 agreement and transfer the tax receipts.

A number of solutions are on the table, including establishing a trust fund. But diplomats said that the most likely scenario was for the Israeli government to use the money to service Palestinian debts.

Israel appeared to pave the way for such a move at a meeting on Tuesday (11 April) where the cabinet pledged to "co-ordinate with the international community regarding humanitarian assistance for the needs of the Palestinian population".

But it stressed that it would not work "via the Palestinian Authority establishment".

The Israeli cabinet's declaration came as the EU announced that it would halt direct transfers to the PA.

Last year direct EU assistance was around EUR 250m, money that is now blocked if the Hamas government does not renounce violence, recognises Israel's right to exist and stands by previous agreements.

Article reports that after strong lobbying from the EU, the Israeli government appeared to have moved a step closer to releasing tax receipts to the Palestinian Authority (PA) on 11 April 2006.

EEAS: Countries: Israel http://www.eeas.europa.eu/israel/index_en.htm

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