Israel shrugs off pressure over Palestinian taxes

AFP , Wednesday 11 May 2011

Israel's government says that freezing the transfer of tax revenues to Palestine is 'a yellow card' for the reconciliation deal with Hamas that could become more serious

Israeli Finance Minister Yuval Steinitz, (Reuters).

Israel's finance minister on Wednesday brushed off international pressure over the freezing of tax revenue transfers to the Palestinians, warning that Israel could take even harsher steps.

"The delay in transferring funds is a yellow card for the Palestinian Authority after the signing of the agreement with Hamas," Yuval Steinitz told public radio, referring to Israel's decision to delay the transfer of 60 million euros ($86 million) to the Palestinian Authority.

"Until now, it is a delay of a week to 10 days, but it could become a red card," he said, explaining that Israel would decide what to do depending on "clarifications" from the Palestinians.

Israel said it was freezing the transfer on 1 May; just days after the Fatah-controlled Palestinian Authority announced a reconciliation deal with Hamas aimed at ending years of rivalry.

The deal envisages the two sides working to set up a caretaker government of independents not allied to either faction which will govern until elections can be held within a year.

But the deal angered Israel which promptly froze the monthly transfer of tax revenues collected on Palestinian goods which pass through its ports and airports, on the grounds it could reach Hamas, which does not recognise the Jewish state and has long espoused an ideology calling for its destruction.

The tax revenues make up two thirds of the Palestinian Authority's annual budget, excluding foreign aid.

The Israeli government is expected to discuss whether or not to prolong the measure, but the radio said no date had yet been set for such a debate.

Earlier this week, Prime Minister Salam Fayyad said the lack of tax revenues meant his government was unable to pay the salaries of the Palestinian Authority's 150,000 employees.

In response, the European Union is to boost aid to the Palestinians by 85 million euros ($122 million) and France is donating 10 million euros ($14.3 million) to ease pressure on the Palestinian government.

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