Israel will cut around 5 percent of the tax handovers, around $138 million, to stop payments to families of jailed Palestinians, the Israeli security cabinet said on Sunday, following similar US legislation last year.
Citing the around $138 million that Abbas' administration reported paying in prisoner stipends in 2018, the Israeli security cabinet said the same amount would be "frozen" from within the taxes collected for Palestine.
"Abu Mazen (Abbas) continues each month to transfer fat salaries to murderers who are in prison," Justice Minister Ayelet Shaked told Israel's Reshet 13 TV. "We must find a way of stopping this money."
TRT World's Reagan Des Vignes has the story.
The Palestinians condemned the Israeli decision as "piracy". "It is an attempt to pressure us and blackmail us," said Wasel Abu Youssef, a senior official with the umbrella Palestine Liberation Organisation (PLO).
"Even if left with just one dollar, we will pay it to the families of the martyrs, of the prisoners and of the wounded," he said.
Under interim peace deals, Israel collects taxes on behalf the Palestinians, who put the current sums at $222 million a month. With negotiations stalled since 2014, Israel has at times withheld money as a measure of pressure.
Palestinian President Mahmoud Abbas, though facing steep aid cuts by Donald Trump's administration that he has boycotted over perceived bias, has held to paying stipends to the families of Palestinians jailed as security offenders or killed by Israel.
Israel and the United States say the policy, which is scaled to give greater monthly payouts for prisoners serving longer sentences, fans Palestinian violence. Abbas describes the slain and jailed Palestinians as "heroes" of a national struggle.
US reductions of aid
The United States passed legislation last year to sharply reduce aid to Palestine unless it stopped the stipends.
The Palestinians last month declined some $60 million in US annual funding for their security forces, worried about exposure to lawsuits under new US anti-terror laws.
The Trump administration has further slashed hundreds of millions of dollars to humanitarian organisations and UN agencies which aid the Palestinians as it seeks to pressure Palestinians.
Some security experts voiced concern that the fiscal blows could destabilise the Palestinian Authority, an interim self-government body set up following the 1993 Oslo peace accords and which keeps order in the occupied West Bank in the face of Hamas, a Palestinian rival.
Meanwhile, 19 Palestinians and one Israeli soldier were wounded on Sunday during clashes in the northern Gaza, the Israeli army and Palestinian medical sources said.
The health ministry of the Hamas movement that runs the blockaded enclave said 19 Palestinians were wounded by live ammunition during the clashes.
Palestinians have for nearly a year gathered at least weekly in various spots along the Gaza fence for peaceful protests that turn violent after harsh response by the Israel forces.
They want to be able to return to the homes their families fled from in the war surrounding Israel's creation in 1948, and are calling for an end to Israel's blockade of Gaza.
On the Israeli side, one soldier was injured "when an explosive device was thrown during Gaza riots on Israel's border fence," Israeli army said on Twitter.
It added that Israeli tanks struck "two Hamas military posts in Gaza in response to the explosive device".
At least 250 Palestinians have been killed by Israeli fire in Gaza since March 30, the majority during protests but also by tank fire and air strikes.
Two Israeli soldiers have been killed during the same period.