Israel plans to use tax revenues it collects on behalf of the Palestinian Authority to pay off its debt of about 2 billion shekels ($544 million) to the state-owned Israel Electric Corporation, Finance Minister Bezalel Smotrich said on Sunday.

According to Reuters, Israel collects taxes on goods passing through Israel to the occupied West Bank on behalf of the Palestinian Authority and transfers the revenues to Ramallah under a long-standing arrangement between the two sides.

Smotrich has been withholding funds allocated for administrative expenses in Gaza since the attack led by the Palestinian Islamic Resistance Movement (Hamas) on Israel on October 7, 2023, led to the outbreak of war in the Palestinian enclave.

Smotrich said at a cabinet meeting on Sunday that the frozen funds are being held in Norway and will instead be used to pay off the 1.9 billion shekels owed to the Israel Electric Corporation.

He added: "We took this step after several hostile measures against Israel, including Norway's unilateral recognition of a Palestinian state."

He added: “The Palestinian Authority’s debts to the Israeli Electricity Company have led to higher loans and interest rates, as well as damage to the company’s credit rating, which has ultimately been reflected on the citizens of Israel.”

Smotrich, an ultranationalist, opposes sending the money to the Palestinian Authority, which uses the funds to pay public sector wages. He accuses the Palestinian Authority of supporting the October 7 attack on Israel led by the Hamas movement that controls Gaza. The Palestinian Authority currently pays 50-60 percent of salaries.

Israel also deducts money equal to the total amount of so-called “martyr” payments made by the Palestinian Authority to the families of militants and civilians killed or imprisoned by Israeli authorities.

There has been no comment from the Palestinian Authority yet.