Israel plans to deduct from tax funds it collects for the Palestinian government to compensate Israelis living near the Gaza Strip for a wave of arson attacks.
Palestinian protesters in Gaza have been sending kites fitted with incendiary devices or burning rags into Israel after Israeli troops responded with deadly force to weekly Friday protests on the border. The fires have damaged forests and farms and disrupted daily life in Israeli communities near the Gaza Strip, while the Palestinian death toll has mounted to more than 120 since the protests began on March 30.
The Palestinian Authority said the Israeli deductions would be "robbery and cowardly aggression" against the Palestinians and would breach agreements signed with Israel.
Israel collects some taxes and customs on behalf of the Palestinian government, which it transfers monthly. It has previously threatened to withhold the tax money over Palestinian actions it opposes.
A statement from Israeli Prime Minister Benjamin Netanyahu's office on Sunday did not say how much would be deducted. Amir Dan, an official from Israel's tax authority, told Israeli Army Radio that agricultural damage from fires started by the kites stood at 5 million shekels (Dh5m) and that damage caused to nature reserves and other land could drive up the figure.
The kites were launched after Gazans began a campaign of protests along the border with Israel to oppose an 11-year Israeli-Egyptian blockade of the coastal strip, and to demand the right for Palestinian refugees to return to former homes in what is now Israel.
Israel accuses Hamas of using the protests as cover for attempts to cross the breach the border fence.
On Monday, Israel's military said its soldiers shot dead one Palestinian and another wounded when they attempted to cross the fence.
The military said the Palestinians were carrying an axe and had damaged the fence.
There was no immediate confirmation from the health ministry in Gaza but the Palestinian news agency Wafa said the incident took place east of Khan Younis in southern Gaza.
The death brings to 125 the number of Palestinians killed by Israeli fire in Gaza since March 30. The vast majority have been killed during protests. No Israeli has been killed.
The protests peaked on May 14 when at least 61 people were killed as tens of thousands approached the heavily fortified border in a demonstration coinciding with the controversial opening of the US embassy in Jerusalem.
On Friday a 21-year-old female volunteer medic was shot dead in southern Gaza as she tried to help a wounded protester.