The latest approved bill will freeze and transfer funds to the Palestinian Authority, only after the PA stops payments to prisoners and their families. 

A Palestinian spokesperson has denounced as a "declaration of war" steps taken by Israel to pass a law to freeze Palestinian funds allocated to prisoners and families of victims.

Senior Palestinian official Hanan Ashrawi on Tuesday accused Israel of theft and piracy. "This is nothing short of highway robbery, this is real piracy, they are stealing Palestinian funds, it's not theirs to decide what to do with it, if we were free we wouldn't need Israel to collect customs."

But, Israeli lawmakers say the payment of funds to Palestinian prisoners is an “expression of support for acts of  terror.” Israel's parliament approved the law – which stipulates the freeze of a sum equivalent to one-twelveth of last years' total funds that Palestine paid out – with 87 of the 120 legislators voting in favor and 15 opposing.

The law will greenlight the withholding of hundreds of millions of dollars in funds from Palestine's welfare payments given to prisoners and their families.

"Should this decision be implemented, it will result in the adoption of important decisions by Palestine to counteract this dangerous decision, because the issue concerns red lines, which are not to be either approached or crossed,” the government spokesman told Ma'an News Agency.

The law originally said that the withheld funds would be allocated to the war against terrorism, “for the welfare of all the residents of Judea and Samaria,” i.e, the settlers as well, and to pay compensation in lawsuits against the Palestinian Authority or Palestinian terrorist operatives.

However, an amendment was only made after the attorney general said using the money would violate international law.

The latest approved version states that the funds will be frozen and transferred to the Palestinian Authority only after it has been established that payments to prisoners and their families have been discontinued.

Prior to the vote, Arab legislators railed against the bill with Joint List of Arab's Jamal Zahalka leveled allegations against Israel, declaring the bill “despicable.”

“You are stealing from the Palestinian people.”

The Palestine-issued social benefit is dispersed to some 35,000 families of Palestinians killed and wounded in the conflict with Israel. The total allocated stipends are approximately US$330 million or 7% of the Palestinian Authority's US$5 billion budget in 2018.