(Communicated by the Prime Minister's Media Adviser and the Ministry of Finance)

Finance Minister Yuval Steinitz and Palestinian Authority Prime Minister Salam Fayyad, this evening (Tuesday, 31 July 2012), agreed on arrangements regarding taxation and the transfer of goods between Israel and the PA.

Prime Minister Benjamin Netanyahu issued the following statement on the agreement:

"The arrangements that have been formulated constitute part of our declared policy of supporting Palestinian society and strengthening its economy. I hope that the arrangements will assist in advancing our relations with the Palestinians in additional areas."

The arrangements are the result of professional consultations conducted between the parties over the past few months, and are intended to facilitate the implementation of previous agreements in the economic sphere, and in particular the Paris Protocol.

The objective of the arrangements is to introduce mechanisms that better facilitate the movement of goods between Israel and the Palestinian Authority, and that support both parties' efforts in reducing illegal trade and tax evasion. The arrangements will further assist in enhancing the Palestinian tax system and thus aid in strengthening the economic base of the Palestinian Authority.

According to the arrangements, the tax clearance mechanism regarding Value Added Taxes (VAT), purchase taxes and import taxes will be based on the actual and accurate transfer of goods between Israel and the Palestinian Authority, replacing the current practice of calculating such tax clearances on the reported transfer of such goods. To support these efforts, the Israeli and Palestinian tax authorities will enhance the exchange of information regarding the actual transfer of goods. Further, in order to improve monitoring and ensure efficiency in the movement of goods, advanced technologies will be employed, Palestinian storage facilities will be established, and the transfer of goods will be generally conducted via designated Israeli crossings. In addition, pipelines for the safe and exclusive transfer of petroleum products from Israel to the Palestinian Authority will be constructed.

The implementation of the new arrangements will commence on January 1, 2013, and will be monitored by a joint team of experts, comprising of representatives from both parties.

The Israeli Finance Minister Steinitz commented on the new arrangements: "This is an important step in strengthening the economic ties between Israel and the Palestinian Authority. The cooperation between our two tax authorities will assist in fighting tax evasion, in increasing the revenues of the Palestinian Authority from the proper collection of taxes, and in reducing illegal trade. I am delighted that our consultations have been concluded successfully, and wish to express my gratitude to Prime Minister Fayyad for his forthcoming and constructive approach. I also wish to express my gratitude to Prime Minister Netanyahu for his ongoing support."

Following the conclusion of the new arrangements, Palestinian Prime Minister Fayyad remarked: "I am certain that the arrangements concluded will help to strengthen the economic base of the Palestinian Authority, through bolstering our tax system and increasing revenue from the proper collection of taxes. I am pleased to say that these arrangements will also improve the economic relations between the Palestinian Authority and Israel. I wish to convey my appreciation and gratitude to Israeli Prime Minister Netanyahu and Israeli Finance Minister Steinitz for their efforts in working towards these arrangements."