Smotrich said set to release PA tax funds, extend banks waiver as part of outposts deal

Finance Minister Bezalel Smotrich will sign off on moves unfreezing tax funds withheld from the Palestinian Authority as part of a deal to win cabinet approval to legalize West Bank outposts and place new sanctions on senior Palestinian officials, according to reports.

The hardline minister will also extend a waiver allowing Israeli banks to work with their Palestinian counterparts, Haaretz reports.

Smotrich had pledged to withhold funds collected by Israel on the PA’s behalf and allow the banks waiver to expire after June until the Israeli government adopts a series of punitive measures against the PA over the moves taken by Norway, Spain and Ireland, in addition to Ramallah’s support for the cases against Israel in the International Court of Justice and the International Criminal Court.

The minister said late Thursday that the security cabinet had signed off on his proposal to legalize five outposts, revoke “various approvals and benefits” for senior PA officials, expand Israeli enforcement powers against Palestinian building in the West Bank and okay thousands of new settlement homes.

Prime Minister Benjamin Netanyahu’s office, which usually announces cabinet-level decisions, has not issued any statements and is not reachable for immediate comment.

An Israeli official told ToI this month that the government was interested in placating Smotrich so that he’ll release some of the Palestinian tax revenues, a major point of contention between Jerusalem and Washington, and extend indemnity to Israeli correspondent banks.

The expiration of the waiver would severely hamper the West Bank economy, which is intrinsically dependent on Israel due to the power imbalance between the sides.

It’s unclear if the scheme will placate Washington, though. A US official said last week that the sides are liable to find themselves in the same situation a month or two down the line “if and when [Smotrich] decides to hold up the funds again.”

“These funds cannot continue to be held for ransom. They belong to the Palestinians,” the US official told ToI.

Jacob Magid and Reuters contributed to this report.