Israel freezes Palestinian Authority funds over prisoner payments

Israel's parliament has passed a law to freeze money transferred to the Palestinian Authority over its social payments to the families of Palestinians killed or imprisoned by Israel.

The legislation was approved late on Monday and gives the Israeli government powers to withhold an amount of money based on what is paid to the prisoners and their families.

As part of the Oslo Accords, Israel collects around $127 million a month in customs duties levied on goods destined for Palestinian markets that transit through Israeli ports and then transfers it to the Palestinian Authority.

A sponsor of the legislation says the PA pays around $330 million a year to prisoners and their families, amounting to seven percent of its budget.

Israel has withheld payments in the past, notably in response to the Palestinians' 2011 admission to the UN cultural agency UNESCO as a full member.

When Israeli ministers first backed the new legislation in February, the Palestinian government called it "piracy and theft" as well as a breach of international law.

Israel says the payments to the families of Palestinians jailed for security offences or killed by Israeli forces while carrying out attacks encourages further violence.

Many Palestinians view the prisoners and those killed while carrying out attacks as heroes or "martyrs" in the struggle against Israeli occupation.

The payments can be a key source of income for families, who have in many cases lost their main breadwinner.

Israeli Defence Minister Avigdor Lieberman hailed the passing of the new law.

"Every shekel (president) Mahmoud Abbas will pay for terrorists and assassins will be automatically withdrawn from the Palestinian Authority's budget," he said. 

"An effective war on terrorism also passes through the pocket - of the terrorists, of their families and of Mahmoud Abbas."

On Monday, Australia ended direct aid to the Palestinian Authority over concerns its donations would contribute to social payments for Palestinians jailed or killed by Israel.

The Trump administration has long backed a bill that would suspend financial aid to the Palestinian Authority (PA) until it ends social payments.