Israel cannot withhold taxes raised from Palestine. As the occupying power, it is only the administrator of any taxes, on behalf of the occupied civil authority, which it has a duty under Geneva Convention 4 to sustain. It cannot purloin money from the civil authority any more than it can purloin natural resources (e.g. water), plant, machinery, goods, etc. An occupying power is expressly prohibited from doing so under GC4. The Geneva Conventions are of course enshrined in international law, so sequestering Palestinian taxes would break international law and, being a state actor, Israel would be committing what the law judges a war crime. Not that such considerations have ever restricted Israeli actions in the past or the USA's ability to turn a blind eye to whatever illegality Israel thinks of next.
Woman moderately wounded by firebomb thrown at her car in north J'lem (Haaretz)
from the article: UNESCO to vote on granting Palestine full membership