Israeli Finance Minister Moshe Kahlon on Sunday signed an order to deduct 42 million shekels ($11,578,350) from taxes collected by Israel on behalf of the Palestinian Authority (PA), Israel Hayoum reported.
This, the Israeli newspaper said, comes in accordance with the law passed in February that stipulated deducting Palestinian prisoner stipends from the PA's coffers.
The total annual deduction will amount to $138 million.
"This is an important battle in our justified war against Palestinian terror," Kahlon said. "We have national honour, and there is justice in the world."
The Palestinian Authority pays a monthly stipend to prisoners, their families and the families of those who have been killed by Israeli settlers and occupation forces.
Palestinian leaders however slammed the decision, with senior Palestine Liberation Organisation (PLO) official, Wasel Abu Youssef, telling Reuters the move was "an attempt to pressure us and blackmail us". Abu Youssef added: "Even if left with just one dollar, we will pay it to the families of the martyrs, of the prisoners and of the wounded."
Following the Israeli decision, the PA threatened to refuse customs duties altogether if Israel pressed ahead with its decision to make deductions. Senior official of Fatah – the Palestinian faction which dominates the PA – Hussein Al-Sheikh, blamed the US for Israel's decision, revealing that international financial institutions and banks had begun imposing a financial siege on the PA at the US' request.