Revenue-sharing arrangements reached nearly 20 years ago between Israel and the Palestinian Authority are either "outdated" or have not been implemented, the World Bank warned on Monday, noting that the Palestinian economy was barely growing.
The revenue deals are hurting the PA's finances, the report said, a day before a key donors' meeting in Brussels, saying tax leakages on bilateral trade with Israel were a major cause of the problem.
The report also warned that international donors are failing to meet their pledges of money to help mitigate the crisis in the Gaza Strip.
Donors pledged 3.5 billion dollars after the coastal enclave was devastated in the 2014 war between Gaza-based militants, led by the Islamist Hamas movement, and the Israeli military.
So far, only 1.4 billion dollars have been dispersed, the report said.
The report, which lists contributions from major donors, showed that the United States and the Netherlands have given 100 per cent of their pledges. The European Union has dispersed 250 million dollars, 72 per cent of its pledge.
Germany has doled out 88 per cent of its planned donation of 63 million dollars.
However, Turkey, a major ally of Hamas, has only given 32 per cent of a promised 200 million dollars. Saudi Arabia has dispersed just 10 per cent of its plan to give 500 million dollars, while Qatar has dispersed 15 per cent of its pledge.
"Only 9 per cent of totally damaged houses and 45 per cent of partially damaged houses have so far been rebuilt," according to the World Bank.
The Gaza economy is not expected to return to pre-2014 war levels until 2018. The economic situation prior to the war was already poor, as the enclave has been under a blockade imposed by Israel, and to some extent Egypt, since Hamas rose to power there about 10 years ago.