Israeli Knesset Legalizes Palestinian Revenue Seizures
The parliament confirmed in a Tuesday statement that its plenary passed the bill through its second and third readings on Monday, elevating it from ministerial practice to binding law. Deductions from funds transferred annually to the Palestinian Authority will henceforth be determined by the Ministerial Committee for National Security Affairs, on the basis of a report filed by Finance Minister Bezalel Smotrich.
The Knesset stated the bill stipulates "the deduction of an amount from the funds transferred by Israel to the Palestinian Authority each year, as determined by the Ministerial Committee for National Security Affairs, with the amount determined based on a report submitted by the Finance Minister (Bezalel Smotrich)."
UNDERSTANDING CLEARANCE REVENUES
Clearance revenues are customs duties and import taxes collected on goods entering Palestinian territories — either directly through Israel or via border crossings under Tel Aviv's control. Under the Paris Economic Protocol, an annex to the 1994 Oslo Agreement, Israel's Ministry of Finance collects these revenues on the Palestinian Authority's behalf, retaining 3% as a service fee — a sum amounting to roughly 380 million shekels ($102 million) annually — before transferring the remainder to Ramallah.
That arrangement began unraveling in 2019, when Israel started withholding portions of the funds under a series of justifications, plunging the Palestinian Authority into a deepening fiscal spiral that has repeatedly left it unable to pay public sector salaries in full.
Most recently, Finance Minister Smotrich had been channeling deductions toward compensation payments ordered by Israeli courts — awards granted to Israeli citizens claiming injury from Palestinian attacks, totaling tens of millions of dollars over recent years. The newly enacted legislation transforms those ad hoc ministerial deductions into permanent statutory authority.
RAMALLAH FIRES BACK: "FINANCIAL PIRACY"
The Palestinian Foreign Ministry issued a sweeping condemnation, describing the law as "a colonial action that falls within a systematic policy of financial piracy and the continued seizure of Palestinian funds."
The ministry declared it constitutes "a blatant violation of signed agreements and international law," and characterized it as "a dangerous escalation in Israel's ongoing war against the Palestinian people, their national rights and their legitimate institutions."
On the humanitarian stakes, the ministry cautioned that sustained revenue withholding and "unlawful" deductions "undermine prospects for stability and threaten the economic, financial, and humanitarian conditions in the Occupied Palestinian Territory."
The broader pattern, it argued, forms part of "Israel's ongoing efforts to weaken the resilience of the Palestinian people, target their national institutions, and undermine their existence and role."
Directing its appeal beyond the region, the ministry called on the international community, the UN, international justice institutions and all states "to assume their legal and moral responsibilities and take effective action to stop these violations" — demanding immediate measures "to compel Israel, as the occupying power, to release all withheld Palestinian funds, end its policy of financial piracy and unlawful deductions," and hold Israeli officials, including Knesset members, accountable for what it termed "collective punishment and the systematic seizure of the Palestinian people's financial rights and resources."
A CRISIS LONG IN THE MAKING
The legislation did not emerge in a vacuum. Last month, Palestinian Prime Minister Mohammad Mustafa had already sounded the alarm, accusing Israel of "suffocating" the West Bank through "political, security, and colonial tools, in addition to the continued deduction of Palestinian clearance revenues."
"These deductions have escalated over the past 12 months, as Israel has not transferred any tax and customs revenues to the state treasury," he said — a warning that now appears prescient in light of the Knesset's latest action.
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