Palestinians could not get their salaries this month after Israel blocked tax funds, officials said on Sunday.
A senior Palestinian official said the aid-dependent Palestinian government in the occupied West Bank had expected to receive tax revenues on June 2 that Israel collects on its behalf because it is the occupier, and had planned to pay salaries two days later.
"As of today, we have not received the tax money, so we failed to pay the salaries," the official said.
A senior Israeli official said the Israeli Finance Ministry had since approved the transfer but would deduct about a quarter of the 250 million shekel ($75 million) payment to cover Palestinian Authority debts to Israeli utilities.
The delay and the deduction, the Israeli official said, came in response to Palestinian Prime Minister Salam Fayyad's demand from the European Union against upgrading its relations with Israel.
In a letter to the EU dated May 27, Fayyad said Israel was continuing to build Jewish settlements in the West Bank and refusing to remove checkpoints which hamper economic development.
Fayyad urged the EU not to upgrade its relations with Israel until the Jewish state abides by international and human rights laws, including freezing settlement activity.
He also called on the Organisation for Economic Cooperation and Development to deny Israel membership because of its construction work on occupied land.
The senior Palestinian government official said the Palestinian Authority "would not be able to pay all salaries if Israel deducts any amount from the Palestinian tax revenues".
The money is the main source of funding for the Palestinian Authority's budget and is used to pay salaries for more than 165,000 government employees in the West Bank and Gaza Strip.
Israel had told Fayyad's government that it was delaying the transfer of the tax funds for "technical reasons".
But Israeli Prime Minister Ehud Olmert hinted to President Mahmoud Abbas during their last meeting he would tell his finance minister to stop the payments to protest against Fayyad's demand.
Last week, Israel announced plans to build nearly 900 new buildings in areas of the West Bank, despite U.S. and Palestinian calls to stop settlement expansion.
Güncelleme Tarihi: 09 Haziran 2008, 08:19