Israel plans to deduct from tax funds it collects for the Palestinians the amount needed to compensate Israelis living near the Gaza Strip who have come under a wave of arson attacks.
Israel has been battling fires caused by kites rigged with incendiary devices or attached to burning rags launched by Palestinians in Gaza that have damaged forests and torched agricultural fields.
The fires have disrupted daily life in communities near the Gaza Strip.
Prime Minister Benjamin Netanyahu tweeted today that he had asked for the deduction.
The kites have been flown by Gazans who have staged weekly protests since late March during which more than 115 Palestinians have been killed by Israeli army fire.
The protests, led by the Islamic militant Hamas that rules Gaza, are meant to oppose an 11-year-old Israeli-Egyptian blockade on the tiny coastal strip which was imposed when Hamas seized Gaza from the Western-backed Palestinian President Mahmoud Abbas.
The Palestinian Authority slammed the move saying it would violate past agreements signed with Israel and called it "robbery and cowardly aggression" against the Palestinians.
Israel collects some taxes and customs on behalf of the Palestinians, which it transfers monthly.
It has previously threatened to withhold the tax money over Palestinian actions it opposes.
The statement from Netanyahu's office today didn't disclose how much would be deducted.
Amir Dan, an official from Israel's tax authority, told Israeli Army Radio that agricultural damage alone stood at 5 million shekels ($1,998,155 NZD) and that damage caused to nature reserves and other land could drive up the figure.