This study aims to study and analyze the clearance tax revenues, public expenditure, and the budget deficit between the years (1996-2019) in Palestine, and to discover the impact of the clearance tax crisis on current expenditures, developmental expenditures, and the budget deficit. In order to complete this study and achieve its purpose, the descriptive-analytical method and the quantitative approach were adopted. Financial data was collected from publications of the Palestinian Monetary Authority and the Palestinian Ministry of Finance. The study concluded that the clearance revenue crisis impacted the current expenditures and the total budget deficit or surplus. In addition, the study showed that there was no effect of this crisis on developmental expenditures. The study recommended restructuring economic agreements with Israel, more specifically the Paris Economic Protocol. Furthermore, the reliance on clearance tax in financing operational and development expenditures should be reduced by diversifying public revenue sources through various investment projects, restructuring the tax system in Palestine, developing the tax collection system, and reducing government spending to the maximum in order to reduce the budget deficit and repay the public debt.