Israel's defence and finance ministers clash over Palestinian tax payout

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JERUSALEM (Reuters) - Israel's defence and finance ministers clashed on Wednesday over whether some West Bank tax revenues should be transferred to the Palestinian Authority, underlining the tensions straining the government as Israeli forces push on with the war in Gaza.

Defence Minister Yoav Gallant called for tax revenues collected by Israel on behalf of the Palestinians in parts of the West Bank under direct Israeli control, to be disbursed without delay.

"The State of Israel is interested in maintaining stability in Judea and Samaria, always and especially during these times," Gallant said in televised remarks, using the term used by many in Israel to refer to the West Bank, where there has been a sharp rise in violence since the war with Hamas began three weeks ago.

"The funds should be transferred immediately so that these may be used by the operational mechanism of the Palestinian Authority and by the sectors of the Palestinian Authority that are dealing with the prevention of terrorism," he said.

"I think it is only appropriate to uphold the decision of the cabinet as decided several days ago," he said.

Under interim peace accords, Israel's finance ministry collects tax on behalf of the Palestinians and makes monthly transfers to the PA, which has limited self rule in the occupied West Bank, but there have been constant wrangles over the arrangement.

Finance Minister Bezalel Smotrich, whose hardline religious nationalist party has strong support among Jewish settlers in the West Bank responded that Gallant was making a "serious mistake" in demanding the release of the funds.

Smotrich had already said he would oppose a payout of the funds, which go to pay for public sector salaries and other government expenditure, accusing Palestinians in the West Bank of supporting the deadly Hamas attack on Israel on Oct. 7.

"I do not intend to let the State of Israel finance our enemies in Judea and Samaria who support the terrorism of Hamas and finance the 7/10 terrorists who murdered and massacred us," he said in a statement.

The two ministers had already found themselves at odds earlier this year when Prime Minister Benjamin Netanyahu sacked Gallant over his opposition to the government's bitterly contested plans to overhaul the judiciary, before revoking the decision in the face of huge public opposition.

(Reporting by James Mackenzie and Steve Scheer; Editing by Sandra Maler)