The Financial War between Israel and the Palestinians.

From Marketplace, I'm Sabrie Beneshore in for David Brancaccio.

Israel is withholding $35 million in tax revenues from the Palestinian Authority, which provides limited

self-governance for the Palestinian people in the West Bank.

The move threatens to worsen an already dire financial situation there, even as a war devastates Gaza the other

Palestinian enclave marketplace is Nova saffo has more. Israel's finance

minister has frozen Palestinian tax revenues before and he now says he's withholding $35 million to

compensate relatives of terror victims following the enactment of two new laws that

allow victims to claim Palestinian funds. The. has maintained a position that all tax

revenues collected on behalf of Palestinians belonged to the Palestinian

Authority and should be released. The U.S. State Department spokesman Matthew

Miller reiterated that stance following Israel's latest action.

The Palestinian Authority has worked incredibly hard to maintain calm, to maintain stability in the West Bank,

and this kind of action by the

Israeli government risks destabilizing the West Bank and further harming Israel's

own security. We think it's an extraordinarily wrong-headed decision.

Israel collects tax revenue on behalf of the Palestinian Authority.

Under decades-long agreements, it's supposed to transfer those funds for

Palestinians limited self-governance.

The World Bank says disruptions in those transfers since and

the World Bank says disruptions in those transfers since Hamas's deadly

October 7 attack on Israeli civilians has raised the risk of fiscal collapse in the West Bank.

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