The Palestinian Authority on Wednesday said it rejected its regular monthly tax transfer from Israel to protest an Israeli decision to deduct sums of money the Palestinians pay to imprisoned terrorists and their families.
Hussein al-Sheikh, the Palestinian official who coordinates the Palestinian Authority's communication with Israel, announced the rejection of the tax transfers.
Israel announced last week that it would withhold over $138 million in revenue to penalize the Palestinian leadership for paying stipends to Palestinian attackers and their families.
Under interim peace deals, Israel collects customs duties and other taxes on behalf of the Western-backed Palestinian Authority and transfers the funds to the Palestinians each month. These transfers cover roughly two-thirds of the Palestinian government's budget.
The freeze of the funds was expected to deal a dire financial blow to the cash-strapped Palestinian leadership, already weakened by the recent U.S. cuts of more than $200 million in bilateral aid. The authority expects it won't be able to pay its employees' full salaries.
Israel says the stipends to prisoners' families encourage violence. Palestinians describe the payments as an important form of social welfare and say they are responsible to all of their citizens.
Although the rejection of the funds is likely to hurt them, the Palestinians are hoping that the move will put pressure on Israel to reverse course. A collapse of the Palestinian Authority could lead to the end of security cooperation with Israel.
Also on Wednesday, the Shin Bet security agency arrested in Ramallah the former head of the Fatah movement's armed wing, Zakaria Zubeidi, for "severe and current terrorist activity."
For years, Zubeidi was on Israel's "most wanted" list before being granted amnesty.
In Jerusalem, Israeli police arrested on Wednesday a top Palestinian official, along with one other, under suspicion of fraud and forgery.
Adnan Ghaith, the Palestinian Authority governor of Jerusalem, was arrested in an overnight raid. The police did not immediately elaborate on the charges.
The arrests come at a time of escalating tension in Jerusalem and the West Bank. Unrest between Palestinian protesters and Israeli police erupted last week around Al-Aqsa mosque, long a flashpoint in the Israeli-Palestinian conflict.
