Bezalel Smotrich, then Knesset member for the Jewish Home party, attends an Israel Memorial Day commemoration in Safed, Israel (2017) | David Cohen 156 / Shutterstock
Israeli occupation of Palestine oppresses the Palestinian people using every possible tool and method—including control over people’s livelihoods. Some of this economic warfare is highly visible: the destruction of economic infrastructure in Gaza, the prevention of Palestinian laborers from accessing the Israeli job market, and the restriction or denial of aid. More inconspicuous—but no less powerful—is Israel’s weaponization of clearance revenues as a suffocating pressure tool against the Palestinian Authority (PA).
Clearance revenues are, in essence, import taxes paid by Palestinian citizens and collected by Israeli authorities thanks to their control over border crossings. These revenues include customs duties, value-added tax (VAT), purchase tax, fuel tax, and income tax from Palestinians working inside the Green Line (in Israel, rather than Palestine). These clearance revenues represent around two-thirds of the Palestinian Authority’s annual income.
In return for its collection service, Israel deducts a 3 percent administrative fee from the total collected taxes. But on top of this fee, Israel manipulates these revenues—freezing them, delaying them, and often refusing to transfer them to the Palestinian Authority—thus holding the livelihoods of millions hostage to its political agenda.
More than 25 percent of the Palestinian population rely on public sector employment as their primary source of income—salaries paid by the Palestinian Authority public treasury. But because of the repeated deductions and ongoing freeze of the clearance revenues, public employees receive only 70 percent to 80 percent of their already modest salaries, at best—and often only after delays that stretch over a month as their primary source of income.
The Israeli government is fully aware that clearance revenues constitute over two-thirds of the Palestinian Authority’s income, nearly equivalent to the total public wage bill. Therefore, any withholding or deduction from the clearance revenues directly results in depriving more than 240,000 employees and beneficiaries of the Palestinian labor force of some or all of their income.
The entire Palestinian population, even children, talk about salaries and the clearance funds. They follow the statements of extremist Israeli Finance Minister Bezalel Smotrich, analyzing and predicting the fate of their livelihoods. It’s the question of every public sector worker, every household, every shopkeeper waiting for income to circulate again. Has the clearance money arrived? Has Israel released our funds?
The clearance revenues process dates back to a 1967 arrangement between Israel and the Occupied Palestinian Territory, formalized by the Paris Protocol in 1994, which in principle laid “the groundwork for strengthening the economic base of the Palestinian side and for exercising its right of economic decision making,” but in practice entrenched the dependence of the Palestinian economy on the Israeli economy within a framework of colonial domination, weakened the PA, and reduced its role to mere administrative functions while absolving the occupying force of its responsibilities.
Alongside Israel’s ability to delay or freeze the transfer of funds, its grip on the Palestinian treasury’s financial resources includes punitive measures against Palestinian banks and the imposition of restrictions and acts of financial piracy—such as the confiscation of funds from about 48 former prisoners from within the Palestinian territories occupied in 1948 and Jerusalem.
In 2016, the Israeli Knesset passed the Counter-Terrorism Law, which allowed the Ministry of Defense to order the seizure or restriction of “property obtained as remuneration or reward for committing a grave terrorist offense or intended for such remuneration or reward” and issue administrative seizure warrants against the funds and property of groups not yet designated as terrorist organizations. Based on this law, the Israeli government published a list of seizure orders targeting the funds and property of a group of released Palestinian prisoners holding Israeli citizenship and Jerusalem residency. In parallel, the law gave Israel new pretexts to determine and increase the funds withheld from clearance revenues.
Two years later, Knesset expanded this remit with the “Law for freezing funds paid by the Palestinian Authority in relation to terrorismfrom funds transferred to it by the Government of Israel,” which mandated a monthly freeze on the portion of Palestinian tax revenues deemed equivalent to the stipends paid by the Palestinian Authority to imprisoned Palestinians and their families. The cornerstone of Israel’s justification for the law is the allegation that financial gain is the primary motivation behind so-called “terrorist acts”—that is, Palestinians carry out resistance operations in exchange for a monthly salary from the PA. This rationale makes clear that Israel uses its ability to freeze Palestinian tax funds as a form of collective punishment.
The implementation of this law began in early 2019. On February 17, Israel withheld about 500 million shekels (approximately US $138 million), claiming this was the amount the PA allocated in 2018 to families of killed, injured, and imprisoned Palestinians. In addition, Israel deducted around 14 million shekels in compensation payments allegedly made by the PA to Palestinian collaborators who fled to Israel.
A law to freeze tax funds is a political tool, activated under political conditions. While the law presents itself as operating on precise financial data and technical procedures—like deducting amounts owed for services Israel provides to the PA, such as electricity and water bills (which is stipulated under the Paris Protocol), Israel’s goal in invoking this law is clearly to collectively and politically punish both the Palestinian Authority and the population living under its administration.
It’s important to note that these financial sanctions have also been used as retaliation against political actions by the PA. For example, following the PA’s December 31, 2022, appeal to the International Court of Justice for an advisory opinion on the legality of the ongoing Israeli occupation since 1967, Israel escalated its punitive financial measures. These included further efforts to deter the PA from pursuing international legal avenues by imposing collective penalties.
Since October 7, the Israeli government has clearly crossed an economic red line—including every other one—by implementing punitive measures such as freezing and withholding clearance revenues.
After October 7 and the declaration of war on Gaza (referred to by Israel as the “Iron Swords War”), Finance Minister Bezalel Smotrich pressured the Israeli government to deduct the funds designated for Gaza from the clearance revenues—claiming this would deny Gaza its financial entitlements and deepen its separation from the West Bank. The Israeli government responded by issuing a decision on November 2, 2023, to instead freeze these funds, estimated at about $1 million per month—roughly 5.5 billion shekels annually. This amount represents half of all clearance revenues (estimated at 12 billion shekels in 2023) and nearly 30 percent of the Palestinian Authority’s 2023 general budget.
Then in March 2024, Israel passed the Benefits for Casualties of Hostile Acts Law (Amendment No. 43, under which the family of an Israeli killed in an attack is entitled to both received from Israel’s National Insurance Institute and sue the Palestinian Authority for damages. These legal provisions allow for compensation claims that may exceed 7 billion shekels—to be deducted from Palestinian Authority funds.
Between 2023 and 2025, Smotrich repeatedly signed orders freezing hundreds of millions of shekels from clearance revenues and redirecting them to compensate families of Israeli settlers killed in Palestinian revolutionary operations. On January 6, 2024, he posted on X (formerly Twitter), “We will put an end to the PA’s celebration of terrorism, the payments to terrorists, and the benefits they receive from us. Those who act against us will pay a heavy price. This is just the beginning.”
Palestinians continue to endure suffering and torment while the world watches. The Israeli occupation persists in devising brutal tools and methods to oppress and drive out Palestinians and undercut their individual and collective capacity for resistance. And clearance funds—which the Israeli government knows the Palestinian Authority depends on to pay salaries—as an easy tool of punishment. Since 1997, these funds have been frozen at least ten times—often following political events such as elections, reconciliation efforts, or moves for international recognition.
The deduction or freezing of clearance revenues, even partially, affects not only direct beneficiaries and those who rely on the PA (over a third of society, including around 160,000 public sector employees and approximately 80,000 others receiving quasi-salaries—such as retirees, those affiliated with the PLO, and families of prisoners and martyrs)—but also disrupts the broader Palestinian economy. Additionally, nearly 120,000 impoverished families receiving cash assistance from the PA are impacted.
The pressing question remains: How long will this continue? Israel continuously violates international humanitarian law and international conventions, particularly the Fourth Geneva Convention, through its use of collective punishment—including the policy of withholding Palestinian funds. If this form of economic blackmail is to end, it is clear that the Paris Protocol must be abandoned, Palestinian dependence on clearance revenues and on imports controlled by the Israeli occupation must be reduced, and Palestinian funds must be recovered. All three require intensified international pressure on Israel.
As of today, the total amount of clearance funds withheld by Israel since 2019 exceeds 7 billion shekels. Smotrich continues to deduct from these funds under various pretexts, all aimed at weakening and shrinking the Palestinian Authority and its ability to function and survive.
