Tax Revenue Tug-of-War: Israel, Palestine, and the Power Struggle

Israel plans to settle the Palestinian Authority's significant debt to the Israel Electric Co using withheld tax revenue. This move, fueled by political tensions post-Gaza conflict, challenges existing financial agreements between Israel and Palestine, and impacts both regions' economies. The withheld funds exacerbate Palestine's financial difficulties.

In a strategic move amid heightened tensions, Israel has announced plans to use tax revenue collected for the Palestinian Authority (PA) to settle a substantial debt owed to the state-run Israel Electric Co (IEC). This decision, disclosed by Finance Minister Bezalel Smotrich, involves redirecting nearly 2 billion shekels in tax revenue to IEC.

The arrangement, stemming from a longstanding financial protocol between Israel and the PA, has been complicated by the recent conflict sparked by the Hamas-led attack on October 7, 2023. Smotrich has justified the withholding of 800 million shekels, intended initially for Gaza, citing anti-Israeli actions and international diplomacy shifts, including Norway's stance on a Palestinian state.

This maneuver comes as the Palestinian Finance Ministry negotiates to release funds held in Norway for essential purchases and debt settlements. As financial strains mount on both sides, the PA is struggling with limited resources, impacting its ability to fulfill public sector wage obligations. The ongoing financial tug-of-war highlights the broader geopolitical tensions affecting the region.

(With inputs from agencies.)