US says Israel's decision to redirect Palestinian funds 'extraordinarily wrongheaded'

Israeli Finance Minister Bezalel Smotrich's decision to transfer $35 million in Palestinian tax revenues to victims of Palestinian attacks is "extraordinarily wrongheaded," and should be reversed, the State Department said Thursday.

Spokesperson Matthew Miller said the decision is damaging to Palestinians and Israel's interests.

"It's important that the Palestinian people have the ability to access their funds, to fund their government, to pursue other activities as they deem fit," he told reporters in response to a question from Anadolu.

"This kind of decision is extraordinarily self-defeating. It doesn't just hurt the Palestinian people. It hurts Israel's interests as well. The Palestinian Authority has worked incredibly hard to maintain calm, to maintain stability in the West Bank over the years, especially since Oct. 7, and this kind of action by the Israeli government risks destabilizing the West Bank and further harming Israel's own security," he added.

Smotrich said in a statement that the withheld funds would be transferred to Israeli families whose members were killed in Palestinian attacks.

Last week, the Shin Bet domestic security agency warned that Israeli government policies against the Palestinian Authority (PA) in the occupied West Bank may lead to its collapse. The PA paid only 50% of civil servants' salaries last month following the decision by Israel to withhold tax revenues from the Ramallah-based authority.

The tax revenues, known in Palestine and Israel as maqasa, are collected by the Israeli government on behalf of the PA on Palestinian imports and exports and Israel in return earns a 3% commission.

The revenues are estimated to total around $220 million every month and represent the main source of income for the PA.