The Knesset enacted a law on Monday to financially penalize the Palestinian Authority for paying stipends to terrorists imprisoned in Israel and their families.
Lawmakers voted 87-15 in favor of the legislation that orders Israel to withhold part of the roughly $130 million in tax revenues that Israel collects on behalf of the Palestinians each month under interim peace agreements.
The development, condemned by the Palestinians, deepened a budget crunch for the Palestinian government already hit hard by U.S. cuts in aid.
Israel has long pushed for the Palestinians to halt the stipends and has said the practice encourages violence. Among the beneficiaries are families of suicide bombers and other militants involved in deadly attacks.
The stipends total approximately $330 million, or roughly 7% of the Palestinian Authority's $5 billion budget in 2018.
Knesset Foreign Affairs and Defense Committee chairman Avi Dichter (Likud), a co-sponsor of the law, said the families of Palestinian attackers had easy access to these funds.
"The only thing you have to do is to kill Israelis, to get arrested or killed," he said.
But the Palestinians argue the number of people involved in deadly attacks is a small percentage of those aided by the fund. They say the tax revenues, collected by Israel for them under past peace agreements, are their money, and that the Palestinian Authority has a responsibility to all of its citizens like any other government.
Saeb Erekat, the chief Palestinian negotiator, accused Israel of "theft and piracy."
"The Palestinian Authority is responsible for all Palestinians, and is responsible for the families of prisoners and martyrs within the program of social assistance," he said.
The Knesset approved the law with 87 of the house's 120 lawmakers voting in favor of the bill while 15 opposed it. The remaining lawmakers were absent.
Elazar Stern, the Yesh Atid party lawmaker who co-sponsored the bill, said the withheld money would be put aside, giving the Israeli government discretion on whether to return it to the Palestinians at some point.
A previous draft version of the bill stipulated the money would go to Israeli victims of Palestinian attacks, but it was scrapped due to potential legal complications. Stern claimed that the martyrs' fund pays higher benefits to those involved in more serious attacks.
"It's not only that they encourage their people to take terror actions. They even encourage them to cause more casualties of innocent people," Stern said.
Defense Minister Avigdor Lieberman wrote on Twitter after the vote, "We promised to halt the stipend free-for-all for terrorists, and we have made good on our promise. It's over. Every shekel that Abu Mazen [Palestinian Authority President Abbas] pays to terrorists and murderers will be automatically deducted from the Palestinian Authority's budget."
Arab lawmakers railed against the bill ahead of the vote. Joint Arab List MK Jamal Zahalka said the bill was "despicable" and called Dichter, a former head of the Shin Bet security agency, "a terrorist."
"You are stealing from the Palestinian people," Zahalka shouted
The law passed the same day that Australia said it ended direct aid to the Palestinian Authority, claiming Australian donations could increase its capacity to pay Palestinians convicted of politically motivated violence.
A few months earlier, the U.S. Congress approved the Taylor Force Act, a bill to halt U.S. funding to the Palestinian Authority until it stops paying stipends to Palestinian attackers and their families.
The United States is now reviewing some $200 million in assistance for the Palestinians. It has also cut some $300 million to the U.N. agency for Palestinian refugees and their descendants, known as UNRWA, further straining the Palestinian budget.
Stuart Force, the father of Taylor Force, an American student who was killed in a 2016 attack in Israel, attended Monday's Knesset vote. He said he was "really heartened" by Israeli lawmakers' support for the Taylor Force Act as it passed through Congress.
Force said he jumped at the opportunity to show his support for the legislation, He said the vote "will bring awareness" to the issue and hoped other countries would follow suit.
The cash-strapped Palestinian Authority, which relies heavily on the Israeli tax funds and international aid, has suffered from chronic budget problems.
Palestinian Prisoner Affairs Minister Issa Karake said Ramallah would continue to pay the prisoners even if Israel halts the transfer of funds.
"When we signed the Oslo Agreement, it was clear to Israel that the Palestinian Authority pays these families, and they never objected. Now they are creating a problem just to avoid addressing the real problems, which stem from the Israeli military occupation and building the settlements on our land, not the social welfare money that goes to the families who lost their source of living," he said.
PA spokesman Youssef al-Mahmoud also condemned the move, saying the money belonged to the Palestinians and Israel had no right to hold it back and was violating signed agreements.
"This money belongs to the Palestinian people and this is legislation to steal the money of the prisoners and the martyrs who are symbols of freedom for us and they must not be harmed," Mahmoud said.
