By Dan Williams
JERUSALEM (Reuters) - Israel will cut around 5 percent of the tax handovers to the Palestinian Authority over its financial support for jailed Palestinian militants, the Israeli security cabinet said on Sunday, following similar U.S. legislation last year.
Under interim peace deals, Israel collects taxes on behalf the Palestinians, who put the current sums at $222 million (£172.2 million) a month. With negotiations stalled since 2014, Israel has at times withheld money as a measure of protest or pressure.
Palestinian President Mahmoud Abbas, though facing steep aid cuts by Donald Trump's administration that he has boycotted over perceived bias, has held to paying stipends to the families of Palestinians jailed as security offenders or killed by Israel.
Israel and the United States say the policy, which is scaled to give greater monthly payouts for prisoners serving longer sentences, fans Palestinian violence. Abbas describes the slain and jailed Palestinians as "heroes" of a national struggle.
Citing the around $138 million that Abbas' administration reported paying in prisoner stipends in 2018, the Israeli security cabinet said the same amount would be "frozen" from within the taxes collected for the Palestinian Authority.
"Abu Mazen (Abbas) continues each month to transfer fat salaries to murderers who are in prison," Justice Minister Ayelet Shaked told Israel's Reshet 13 TV. "We must find a way of stopping this money."
The Palestinians condemned the Israeli decision as "piracy".
"It is an attempt to pressure us and blackmail us," Wasel Abu Youssef, a senior official with the umbrella Palestine Liberation Organisation (PLO), told Reuters. "Even if left with just one dollar, we will pay it to the families of the martyrs, of the prisoners and of the wounded."
The United States passed legislation last year to sharply reduce aid to the Palestinian Authority unless it stopped the stipends. The measure, known as the Taylor Force Act, was named after a 29-year-old American military veteran fatally stabbed by a Palestinian while visiting Israel in 2016.
The Palestinians last month declined some $60 million in U.S. annual funding for their security forces, worried about exposure to lawsuits under new U.S. anti-terror laws.
The Trump administration has further slashed hundreds of millions of dollars to humanitarian organisations and U.N. agencies which aid the Palestinians as it seeks to pressure Abbas to come back to the negotiating table.
Some security experts voiced concern that the fiscal blows could destabilise the Palestinian Authority, an interim self-government body set up following the 1993 Oslo peace accords and which helps Israel keep order in the occupied West Bank in the face of Hamas, a Palestinian Islamist rival.
"If he (Abbas) chooses to collapse by keeping up payments to the murderers, then let him collapse," said Shaked, a far-rightist in Prime Minister Benjamin Netanyahu's conservative coalition government.
(Additional reporting by Nidal al-Mughrabi and Ali Sawafta; Writing by Dan Williams; Editing by Hugh Lawson and David Evans)