A senior Palestinian official condemned Israel's freeze on Palestinian tax revenues as a "new war crime," media reported.
"This decision is a new Israeli war crime, but we won't back off in the face of those pressures," Press TV reported citing chief palestinian negotiator, Saeb Erekat, as saying Saturday.
He added, "Israel is once again responding to our legal steps with further illegal collective punishments."
An Israeli official confirmed that Tel Aviv has blocked the transfer of taxes it collects on behalf of Palestinians in retaliation for their application to join the International Criminal Court (ICC) and file war crimes charges against Israel.
"The funds for the month of December were due to pass Friday, but it was decided to halt the transfer as part of the response to the Palestinian move," the Israeli daily Haaretz quoted an unidentified Israeli official as saying.
The official went on to say the halting involves 127 million dollars worth of value-added tax (VAT) and customs duties on Palestinian goods that pass through Israel.
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On Wednesday, Palestinian President Mahmoud Abbas signed the documents required for Palestine to join 20 international organisations, including the ICC.
Abbas signed the request to join the ICC after the UN Security Council rejected a Palestinian proposal for statehood Tuesday.
In 2012, following Palestine's wining of a UN vote acknowledging it as a non-member state, Tel Aviv again delayed payments to the Palestinians.
After foreign aid is deducted, tax revenues account for around two-thirds of the Palestinian Authority's yearly budget.