Tel Aviv: Israel is halting tax payments it collects for the Palestinians in response to their successful bid to raise their UN status, local media reported Sunday, citing Israeli Finance Minister Yuval Steinitz.
"I have no intention of transferring the tax payments to the Palestinian Authority this month. I plan to use them to offset Palestinian debt to the Israel Electric Corporation," Steinitz said at the beginning of a weekly cabinet meeting.
"We have said from the beginning that the raising of the status of Palestine at the UN would produce a reaction from Israel."
A total of 460 million shekels (about $120 million) would be withheld from the Palestinians, reported the Israeli newspaper Haaretz.
The move comes after the UN General Assembly recognised last Thursday the Palestinian Authority (PA) as a non-member observer state.
The Palestinian bid, submitted by President Mahmoud Abbas, was approved by 138 UN members, while nine voted against and 41 abstained from voting. The bid faced fierce opposition from Israel and the US.
The move amounts to an implicit recognition of the Palestinian statehood and increases PA`s chances of joining other UN bodies.
It also allows the Palestinian Authority to challenge the continuing construction of Israeli settlements on the occupied Palestinian land in the International Criminal Court.