Palestinian Economy in Ruins, U.N. Says Under economic arrangements negotiated as a corollary to the Oslo peace accord, the
Palestinians are entitled to customs duties, sales taxes and other levies on goods bought and
sold within their own autonomous territory. The Israelis, who control the seaports and
border crossings used for Palestinian commerce, collect the import taxes themselves, and
transfer the payments monthly to the Palestinian treasury. Most sales taxes are also
collected by Israeli authorities, and transferred later to the Palestinians.

Until recently, those payments averaged more than $50 million a month — enough to meet
the entire Palestinian government payroll, from doctors and schoolteachers to bureaucrats
and policemen.

In the seven weeks from early October through the end of November, official sources say,
the transfers came to no more than $8 million, as Israel reduced and delayed the payments
for political and bureaucratic reasons. The Palestinians had amassed unpaid debts and failed
to provide all the invoices and other paperwork needed for reimbursement, Israeli officials
said.