Paris, 29 April 1994

Between the Government of the State of Israel and the PLO, Representing the Palestinian people,

This protocol lays the groundwork for strengthening the economic base of the Palestinian side and for exercising its right of economic decision making in accordance with its own development plan and priorities. The two sides recognize each other's economic lies with other markets and the need to create a better economic environment for their peoples and individuals'. 'The Palestinian Authority will levy VAT at one rate on both locally produced goods and services and on imports by the Palestinians ... and may fix it at the level of 15% or 16%.

In addition to the points of exit and entry designated according to the Article regarding Passages in Annex 1 of the Agreement for the purpose of export and import of goods, the Palestinian side has the right to use all points of exit and entry in Israel designated for that purpose. The import and export of the Palestinians through the points of exit and entry in Israel will be given equal trade and economic treatment.

The New Israeli Shequel (NIS) will be one of the circulating currencies in the Areas (Occupied Territory) and will legally serve there as means of payment for all purposes including official transactions. Any circulating currency, including the NIS will be accepted by the Palestinian Authority and by all its institutions, local authorities and banks, when offered as a means of payment for any transaction.

Banks in the Areas will accept NIS deposits. The liquidity requirements on the various kinds of NIS deposits (or deposit linked to the NIS) in banks operating in the Areas will not be less the 4% to 8%, according to the type of deposits. Changes of over 1% in the liquidity requirements of NIS deposits (or deposits linked to the NIS) in Israel will call for corresponding changes in the above mentioned rates.

Israel and the Palestinian Authority will each determine and regulate independently its own tax policy in matters of direct taxation, including income tax on individuals and corporations, property taxes, municipal taxes and frees.

Each tax administration will have the right to levy direct taxes generated by economic activities within its area.

Both side will attempts to maintain the normality of movement of labour between them, subject to each side's right to determine from time to time the extent and conditions of the labour movement into its area. If the normal movement is suspended temporarily by either side, it will give the other side immediate notification, and the other side may request that the matter be discussed in the Joint Economic Committee.

The placement and employment of workers from one side in the area of the other side will be through the employment service of the other side and in accordance with the other side's legislation. The Palestinian side has the right to regulate the employment of Palestinian labour in Israel through the Palestinian employment service, and Israeli employment service will cooperate and coordinate in this regard.