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Prime Minister Ehud Olmert and Palestinian Authority Chairman Mahmoud Abbas will not be meeting today in Jericho as planned.

The meeting was canceled over a disagreement on Palestinian tax revenues collected by Israel, Palestinian sources said.

During preparatory talks, aides to the Palestinian leader asked that Olmert announce during the meeting that Israel would transfer tens of millions of dollars to the Palestinian Authority, but Israel refused.

However, Israeli sources said the main reason for the cancellation is Abbas' failure to secure a cease-fire agreement in his talks with rival Palestinian factions.

Under the agreement between Israel and the Palestinian Authority, Israel has been collecting value-added tax and other taxes since 1994, and it transfers the revenues to the PA. However, since the Hamas victory in the January 2006 Palestinian national elections, Israel has refused to transfer the funds to the PA.

Six months ago, $100 million was released to Abbas' control through a mechanism that aimed to bypass Hamas, after the leaders of Hamas and Fatah met six months ago.

Courts freeze taxes

Palestinians estimate Israel is holding approximately $700 million, but Israeli sources say only $300-400 million is likely to be released, because Israeli courts have frozen the rest of the funds.

Israeli sources said yesterday that Abbas had tried to reach a gradual agreement, starting with a cease-fire in the Gaza Strip and followed by a calm in the West Bank, but ran into Hamas opposition.

"We understand why he chose to delay the meeting," a political source said. "He did not want to come empty handed."