American and European officials are putting pressure on Jerusalem over Israeli plans to impose levies on Palestinian labour within its borders.

In April 2008, the Israeli government agreed to approve an extra 5,000 employment permits for Palestinians within Israel.

However, a decision was made to charge Israeli employers of Palestinian workers a monthly fee of 1,000 NIS (£178), a move that US and Quartet officials fear may deter Israeli employers from hiring Palestinians, contradicting Israel’s commitments to increase Palestinian employment.

The levies are to be imposed on employers of Palestinian construction workers, who make up around 70 per cent of the Palestinian workforce legally employed in Israel.

A Ministry of Finance spokesman said: “The fee is identical to the fee already imposed on migrant construction workers.” Its purpose, the spokesman said, was “to encourage employment of Israeli workers”.

However, a Quartet spokesperson in Jerusalem said: “We would like to see permits implemented as soon as possible as they was agreed with the Israeli government in the main package. We’re concerned about the levies and we are in discussion about this.”