March 27, 2015 / 3:40 PM / 5 years ago

Israel says it will release frozen tax revenue to Palestinians

JERUSALEM (Reuters) - Israel said on Friday it would release millions of dollars of tax income to the Palestinian Authority, three months after freezing the payments in protest at unilateral Palestinian moves towards statehood.

Prime Minister Benjamin Netanyahu’s office said the funds would be sent for humanitarian reasons and in line with “Israel’s interests”.

The move may be seen as a bid to rebuild bridges, particularly with the White House, which criticized hawkish comments about the Palestinians that Netanyahu made in the build-up to his election victory this month.

Israel stopped the monthly transfer of $130 million of tax and customs duties that it collects on behalf of the Palestinian Authority in January after the organization applied to join the International Criminal Court.

Since then, more than $500 million has been withheld, prompting the Palestinian Authority, which administers the West Bank, to cut most of its employees’ salaries by 40 percent and resort to an emergency budget.

With a deficit already at around 15 percent of GDP and the tax transfers accounting for two-thirds of income, the budget is falling into a deeper hole every month. Unemployment stands at 25 percent and output is set to contract this year, sharply increasing the threat of instability and violence.

Ehab Bseisso, a spokesman for the Palestinian government in Ramallah, told Reuters it had not been informed the money would be transferred, but that “the Palestinian leadership had made contacts with all parties of the international community to compel Israel to release it”.

Netanyahu’s office said that “the tax revenues that accrued up until February will be transferred, offset by payments for services rendered to the Palestinian population, such as electricity, water and hospitalization.”

The decision, it said, was “based on humanitarian concerns and in overall consideration of Israel’s interests at this time.” It did not say whether the transfer would be repeated.

“Given the deteriorating situation in the Middle East, one must act responsibly and with due consideration alongside a determined struggle against extremist elements,” it added.

Reporting by Ari Rabinovitch and Nidal al-Mughrabi, Editing by Andrew Heavens and Mark Trevelyan

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