Despite reports that progress is being made toward securing an agreement to extend peace talks, an Israeli government official announced Thursday that Israel will significantly cut the tax funds allocated to the Palestinian Authority.

Major Gen. Yoav (Poli) Mordechai, the coordinator of Israeli government activities in the territories, informed the Palestinians of the decision, he said.

The money kept by Israel will be deducted from outstanding Palestinian debts, he said.

“The step was taken in light of continued Palestinian unilateral measures with the UN treaties, which constitute a clear violation of the agreements between Israel and the PA,” he said.

In addition, Israel will halt development efforts at the Gaza Marine offshore gas field, and will limit money transfers between Israeli and Palestinian bank accounts, Mordechai added.

On Wednesday, a senior official warned about the imminent drastic tax cuts, but said the suspended funds were “the money they spend on terrorists and their families.”

“This step would be less dramatic than cutting entirely our monthly tax payments to the PA, but it would be step that would be in place,” he said.

Israel considers the Palestinian payments to Palestinian security prisoners and their families as “funding terrorism,” the senior official said.

According to an Israeli government document, “every Palestinian inmate in an Israeli prison who is convicted of a terrorism-related offense receives a monthly salary, from the beginning of his imprisonment.”

Israel says financial sanctions against the Palestinians are a response to PA President Mahmoud Abbas’s dramatic signing of 15 international treaties in contravention — Israel says — of previous agreements. The Palestinians, meanwhile, say they signed the treaties in response to Israel’s failure to go ahead with a planned release of Palestinian prisoners.