Israel and the Palestinian Authority signed agreements on Tuesday to regulate bilateral trade and taxation.

The agreements were thrashed out in a series of secret meetings that lasted more than a year and had many ups and downs. Israeli sources said they also have diplomatic ramifications.

The agreements, signed by Finance Minister Yuval Steinitz and PA Prime Minister Salam Fayyad, are meant to facilitate implementation of existing economic agreements, particularly the 1994 Paris Protocol, in order to expand bilateral trade and combat smuggling and tax evasion. They will also upgrade the PA's tax collection infrastructure, thereby increasing its revenues.

The agreements state that with regard to value-added tax, purchase tax and customs duties, Israel and the PA will settle their accounts on the basis of actual transactions rather than reported transactions, as was the case previously.

This will require them to improve their sharing of data.

Additionally, advanced technologies will be employed to facilitate and monitor trade, including setting up special warehouses in the PA and building a pipeline to enable the safe transfer of fuel from Israel to the Palestinians.

The agreements will take effect on January 1, 2013. Implementation will be monitored by a team of experts from both sides, to be set up in the coming days.

Steinitz termed the agreements an important step to bolster economic ties between Israel and the PA.

Fayyad said the agreements will strengthen the PA's economic foundations and further economic ties between Israel and the PA. He thanked both Steinitz and Prime Minister Benjamin Netanyahu for the effort they invested in concluding the deal.

Netanyahu said the agreements furthered his overall policy of trying to strengthen the Palestinians' economy and civil society, and hoped they would lead to progress on other fronts as well.

Open gallery view Then Prime Minister Salam Fayyad in his office. Credit: Daniel Bar-On