Though it is widely believed that economic agreements between Israel and the Palestinian Authority are frozen because of the latter's refusal to fulfill its basic obligation to fight terrorism - it's not true. Only two weeks ago, on July 18, Israel transferred no less than 4.3 million shekels - almost $1 million - to the Palestinian Authority's account in Israel's Postal Bank. The source for this information? A copy of a bank transfer statement that mistakenly reached a Jewish resident of the Shomron.

The errant bank notice states that the transferred funds are for "Value Added Tax." The 1993 Oslo Accords stipulate that the PA will be exempt from paying the 17% VAT that Israelis pay for goods and services. Israel thus periodically reimburses the PA for the sums it paid in VAT.

Health Minister Danny Naveh recently said, "The situation in which the money transferred by Israel to the PA is used for terrorism is an insane situation that must be stopped."

The Finance Ministry spokesman, contacted this morning for a response on the above transfer by Arutz-7's Shimon Cohen, stated, "The Ministry acts according to law, and does not transfer monies on which a confiscation order has been placed."

In July 2002, before a similar transfer of 70 million shekels, it was announced that "the clearance will be made to a PA bank account that is managed and controlled solely by [newly-appointed PA Treasurer] Salem Fayad." Arutz-7 therefore further asked the Finance Ministry today, shortly before press time, if a mechanism is in place to ensure that the money is not used for terrorism. A response has not yet been received.

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