Jerusalem: Israel is delaying the transfer of taxes it collects on behalf of the Palestinians in retaliation for their application to join the International Criminal Court, a newspaper reported on Saturday.

Haaretz daily, citing an unidentified Israeli official, said the move involves USD 127 million (106 million euros) in VAT and customs duties on goods for the Palestinian territories that pass through Israel.

"The funds for the month of December were due to pass on Friday, but it was decided to half the transfer as part of the response to the Palestinian move," the official told Haaretz.

The punitive measure is in response to Friday's Palestinian application to join the ICC and press war crimes charges against Israel there, said the official.

Israeli army radio and other local media also reported the story, but there was no immediate response to AFP's request for official confirmation.

Israel has delayed payments to the Palestinians to signal its displeasure in the past, including in 2012 after the Palestinians won a November 29 UN vote recognising Palestine as a non-member state.

It did it again in May 2011 after Palestinian president Mahmud Abbas announced a reconciliation deal with Hamas aimed at ending years of enmity between the Islamist militant group and his Fatah movement, and in November 2011, after the Palestinians won admission to UNESCO.

The tax revenues make up two thirds of the Palestinian Authority's annual budget, excluding foreign aid.

Earlier on Saturday sources close to an Israeli government official told AFP that Israel is considering filing war crimes suits overseas against Palestinian leaders in response to their ICC application.

Legal proceedings at courts in the United States and elsewhere are being weighed against Abbas, his Palestinian Authority and other senior officials, the sources said in a statement.

It said that the basis of the complaints would be that Abbas's partnership in a Palestinian consensus government with Hamas makes him complicit in the militant Islamist group's rocket attacks from Gaza against civilians inside Israel.

"In recent days officials in Israel stressed that those who should be wary of legal proceedings are the heads of the PA who cooperate within the unity government with Hamas, a declared terrorist organisation which like the Islamic State (jihadist group) carries out war crimes -- it fires at civilians from within population centres," it said.

The sources, who declined to be named, did not detail precisely where or when such proceedings could be launched.