Palestinian Authority President Mahmoud Abbas. Photo: Reuters / Carlo Allegri.

Israel will deduct some $138 million from taxes that it collects on behalf of the Palestinian Authority (PA) in response to stipends the PA pays to families of Palestinians jailed for terror offenses, the Israeli security cabinet said on Sunday.

Israel and the US — where legislation with a similar aim, the Taylor Force Act, was enacted last year — argue that the stipends foster Palestinian attacks, while Palestinians describe the money as welfare for heroes of their national struggle.

Israeli Ambassador to the UN Danny Danon said of the move, “No country in the world should pay the vile terrorists that murder its people. The blood money the PA gives to terrorists reflects its culture of terror and incitement.”

“We will continue to work with the international community against the financial industry that funds murderers and encourages further attacks,” he added.