THE PARIS PROTOCOL AND FISCAL FRAGILITY: WITHHOLDING CLEARANCE TAX REVENUES IN PALESTINE (1997–2022)

Abstrak

This article examines the Palestinian Authority’s fiscal responses to the withholding of clearance revenues crisis from 1997 to 2022, a critical issue rooted in international economic agreements. Since data for subsequent years were unavailable due to the impact of war (Gaza War), the analysis focuses on data up to 2022.The Paris Protocol, which governs economic relations between Israel and Palestine, establishes a customs union characterized by the absence of economic borders between the two sides and relies on a joint economic committee. Using data from official reports issued by the Ministry of Finance and the Palestine Monetary Authority, this study uses descriptive statistics and regression analysis to explore the relationship between current expenditures and clearance tax revenues. The results show a positive association between these expenditures and revenues, highlighting the significant impact of withheld funds on fiscal policy. The research highlights the need to renegotiate the Paris Economic Protocol to address structural weaknesses and prevent recurring fiscal crises. Recommendations include enhancing the efficiency of the tax system, diversifying revenue sources, and rationalizing spending to enhance fiscal stability. By placing the analysis in a broader context of international economic relations, this study contributes to understanding the interaction between domestic fiscal crises and international agreements. These findings have implications for policymakers and international stakeholders seeking to promote sustainable economic growth and mitigate the risks of unequal economic arrangements.