The government will withhold 149 million shekels (some $43,084,252) from the tax money it charges on behalf of the Palestinian Authority, after the security cabinet approved the move on Sunday.

Defense Minister Naftali Bennett said earlier that he was seeking the cabinet's approval for the move.

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The funds will be withdrawn following the defense establishment's calculations of the sums that have been transferred by the Israeli government over the past year to families of victims of violent attacks.

International mediators believe that this move will reignite a crisis between Israel and the PA, as it did when Israel made a similar decision a year ago.

The security cabinet also discussed the resumption of the understandings reached with Hamas after the latest round of escalation, including the transfer of funds to members of the organization. Meanwhile, Qatar continues to transfer funds to the Gaza Strip, with the approval of Israel.

In July 2018, Israel passed a law according to which each month it must withold funds from the tax money it collects on behalf of the PA, which it is obligated to eventually transfer to the Palestinians. Israel claims that the PA has been using this money to support terrorist activities, by allocating stipends to terrorists and their families.

Since the law was passed, Israel has already deducted some 500 million shekels, which the defense establishment says were used in 2018 to pay Palestinian prisoners jailed in Israel, released prisoners and their families. Now Bennett wishes to present a report which will indicate that the PA has transferred an additional 149 million shekels to families of people who are not necessarily prisoners. This report is meant to justify Israel's deduction of the money from the sum it provides the Palestinians. The report was cultivated by the Defense Ministry in coordination with the Shin Bet security service, the Israeli army, the Israel Police and the Israel Prison Service.

Last time Israel announced it was deducting Palestinian funds, the PA refused to receive the remaining sum of money and was thrust into a deep financial crisis, which Israel sought to help it resolve. Israeli political and security officials participated in ongoing negotiations in an attempt to persuade the PA to accept the remainder of the funds it did not intend to freeze. The efforts were made in order to stop the financial crisis from leading to a total economic collapse in the West Bank, as well as to a rise in terrorism.

The United Nations, Egypt and other members of the European Union tried to find a solution. One of the proposals made was to abandon the current mechanism, through which terrorists get stipends. They suggested that the PA adopt a national insurance stipend policy, through which money would be handed out to the families of Palestinian victims of altercations with Israel, as well as to Palestinian prisoners – regardless of whether they had participated in terror activities. This solution has not been accepted yet.