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Israel, Palestinians agree on tax revenue transfer after spat over utility debts deduction

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RAMALLAH, West Bank — Palestinian President Mahmoud Abbas said Saturday that he has reached an agreement with Israel in which essential tax revenues it collects for the Palestinians will be transferred following a four-month freeze.

Abbas initially rejected Israel's unfreezing of the tax funds because it included a deduction to settle debts incurred by his Palestinian Authority, including for unpaid utility bills. Speaking to a gathering of Palestinians leaders, Abbas said that "There is an agreement; the money will be sent in full."

Israel typically collects taxes and customs on behalf of the Palestinians and then transfers the sums to Abbas. They account for 70 percent of the Palestinian Authority's revenue.

Israel froze the tax transfers as punishment in January, after the Palestinians applied to join the International Criminal Court — a step that could pave the way for possible war crimes charges against Israel.

Israeli Prime Minister Benjamin Netanyahu announced after his re-election last month that the transfers would resume as a humanitarian gesture. Palestinian officials said Israel owes the Palestinian Authority 1.8 billion shekels ($450 million) in frozen funds, but that Israel demanded to keep hundreds of millions of shekels for debt repayment.

Israel says that the Palestinians have racked up debts to Israel's electric company in excess of 2 billion shekels ($510 million) yet Israel has continued to provide electricity out of concern for the Palestinian population.

Nickolay Mladenov, the United Nations special coordinator for the Middle East peace process, welcomed the release of the tax revenues.

"Withholding these revenues for over four months has undermined the stability of the Palestinian institutions," he said. "This agreement is an important step in the right direction for both sides."

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