TEL AVIV, Israel - The Israeli government will stop transferring tax money to the Palestinians in retaliation for their recent drive for further United Nations recognition, an Israeli official said Thursday, putting at risk hundreds of millions of dollars needed to run their government.
The move marks Israel's toughest sanction yet since U.S.-brokered peace talks have faltered.
The Palestinians owe Israeli companies hundreds of millions of dollars for electricity, power and other services.
The Israeli official, speaking on condition of anonymity as he wasn't authorized to speak publicly, said Israel would deduct the Palestinian debt against its monthly transfer of tax money that it collects for the Palestinians.
Under interim peace accords, Israel collects taxes on behalf of the Palestinians and transfers about $100 million a month. Without it, the Palestinian Authority likely couldn't pay the salaries of its tens of thousands of employees.
The official did not elaborate on how much money would be withheld or how long it would be withheld.
Reacting to the announcement, Palestinian Labor Minister Ahmad Majdalani called the Israeli decision illegal and a political, rather than economic, move. He said the Palestinian Authority owes the Israel electric company alone some $400 million.
The decision is part of an escalating back-and-forth campaign since the talks helmed by U.S. Secretary of State John Kerry floundered.