Mahmoud Abbas
Palestinian President Mahmoud Abbas has rejected Israel's partial payment of Palestinian tax revenue Reuters

Palestinian President Mahmoud Abbas has returned hundreds of millions of dollars of frozen tax revenues to Israel after it failed to return the full amount owed to the Palestinian Authority by deducting money to cover utility debts.

In a move seen as retaliation for Palestine joining of the International Criminal Court (ICC), which was formalised on 1 April and could allow the country to prosecute Israel for war crimes, Israel suspended the transfer of tax and customs revenues in January.

Caving to international pressure last week, Israel agreed to restart the transfers and said it would immediately pay around $400m (£267.93m), withholding the sum owed by Palestine to Israel for electricity, water and hospital bills.

The Palestinian Authority has insisted on receiving the money in full.

One-third of tax revenue withheld

Speaking at a rally in the Palestinian West Bank city of Ramallah, Abbas said: "We do not want this money."

Addressing Israel, he added: "We will return the money to you, and either you give it to us [in full] or we will go to arbitration or the court."

Abbas said that the subtractions amounted to a third of the money owed by Israel to Palestine. "This is our money and not a favour from you," he said.

The suspension of transfers from Israel wreaked financial chaos on the Palestinian Authority, forcing it to announce an emergency budget, borrow huge amounts from local banks and slash the salaries of thousands of government employees by 40%.

Israel has previously suspended the transfers on three separate occasions in the past 10 years.

The freezing of tax revenues prompted Palestinian activists to respond by confiscating goods and boycotting Israeli products.

Palestine's West Bank was taken by Israel in the 1967 Middle East War and it relies on electricity supplied by the Israel Electric Corp to a large degree.