Israel Uses Rp8.8 Trillion in Palestinian Taxes to Pay Electricity Debt

TEMPO.CO, Jakarta - Israel plans to use tax revenues collected on behalf of Palestine to pay off a debt of 2 billion shekels or equivalent to Rp8.8 trillion. Reported by Reuters, Finance Minister Bezalel Smotrich said the debt would be paid to the state-owned Israel Electric Co.

Israel collects taxes on goods passing through Israel to the West Bank. The tax funds were supposed to be transferred to Ramallah under a long-standing arrangement between the two parties.

However, since the Hamas-led attack on Israel on October 7, 2023, Smotrich has withheld funds of 800 million shekels allocated for administrative costs in Gaza. The frozen funds are stored in Norway.

He said at a cabinet meeting on Sunday that the funds were used to pay off a debt to the IEC of 1.9 billion shekels. "The procedure was carried out after several anti-Israeli actions and including Norway's unilateral recognition of the state of Palestine," Smotrich told cabinet ministers.

Palestine's debt to the IEC, Smotrich said, resulted in high loans and interest rates. He continued that the high Palestinian debt caused damage to the credibility of the IEC, which was eventually transferred to Israeli citizens.

The Palestinian Finance Ministry said it had agreed for Norway to release part of the funds from the account, which had been held since January, amounting to 1.5 billion shekels. As part of the deal, 767 million shekels of the funds held by Norway will be paid to the Israeli fuel company. The funds will be used to buy weekly fuel for the coming months. The same amount will be used to pay off the debt related to the Palestinian distribution company's electricity to the IEC.

Smotrich opposed sending funds to the Palestinian Authority, which uses the money to pay the salaries of public sector employees. He accused the Palestinians of supporting the October 7, 2023 attack on Israel led by the Islamist movement Hamas, which controls Gaza. The Palestinian Authority currently pays 50-60 percent of employee salaries.

Israel also deducted funds equivalent to the total martyr payments, which the Palestinians pay to the families of militants and civilians killed or imprisoned by the Israeli authorities.

The Palestinian Finance Ministry said 2.1 billion shekels were still being withheld by Israel, bringing the total withheld funds to more than 3.6 billion shekels in 2024. Israel began deducting an average of 275 million shekels each month from its tax revenues in October 2023, equivalent to the government’s monthly allocation for Gaza.

“This exacerbates the financial crisis, as the government continues to transfer these allocations directly to the accounts of civil servants in Gaza,” the ministry said. The Finance Ministry is working with international partners to ensure the funds are released soon.

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