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Official: Israel to withhold Palestinian tax fees

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Photo - Israeli Prime Minister Benjamin Netanyahu chairs the weekly cabinet meeting in his office in Jerusalem, Sunday, April 6, 2014. Speaking at a weekly Cabinet meeting Sunday Netanyahu said the Palestinians have lots to lose by taking unilateral steps and will be answered in kind by Israel. Last week, the Palestinians renewed their push for membership in United Nations agencies. (AP Photo/Gali Tibbon, Pool)
Israeli Prime Minister Benjamin Netanyahu chairs the weekly cabinet meeting in his office in Jerusalem, Sunday, April 6, 2014. Speaking at a weekly Cabinet meeting Sunday Netanyahu said the Palestinians have lots to lose by taking unilateral steps and will be answered in kind by Israel. Last week, the Palestinians renewed their push for membership in United Nations agencies. (AP Photo/Gali Tibbon, Pool)
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TEL AVIV, Israel (AP) — 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. Under the peace talks' terms, Israel promised to release 104 long-held Palestinian prisoners in four groups. At the same time, the Palestinians said they would suspend a campaign to sign up Palestine, recognized by the U.N. General Assembly as a non-member observer state, for as many as 63 U.N. agencies, treaties and conventions.

Israel last week failed to release the fourth group of prisoners and renewed a push to build homes in an Israeli settlement in east Jerusalem — the area of the holy city sought by the Palestinians for their future capital. In response, Abbas signed letters of accession for 15 international conventions. Israel then called off the final prisoner release.

Israeli Prime Minister Benjamin Netanyahu also ordered his ministers to cut off contact with their Palestinian counterparts, while Israeli officials have prevented Palestinian mobile phone company Wataniya from transferring equipment to Gaza.

The move looks to deepen the crisis between the sides as the U.S. seeks to save peace talks that are supposed to conclude by the end of the month. The U.S is hoping to extend them to the end of the year.

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