Several dailies report a decision announced yesterday by Israel’s government to withhold approximately £75million in taxes collected on behalf of the Palestinian Authority (PA). The Financial Times, Independent i, Times, City AM and online editions of the Guardian and Telegraph describe the announcement as a response to the PA’s decision to push through a vote at the UN General Assembly on Thursday which granted the Palestinian delegation ‘non-member state’ status. Most reports quote Israel’s Finance Minister Yuval Steinitz, who explained that the withheld tax money would be used to pay off PA debt owed to Israel’s Electric Company that provides electricity to Palestinian territories.

Meanwhile, the Times includes an analysis by Alexandra Frean who outlines the potential impact on US-Israel relations of Friday’s decision announced by Israel’s government to approve the construction of around 3,000 homes in East Jerusalem and the West Bank. The approval, also viewed as an Israeli measure in response to the UN General Assembly vote, attracted widely reported criticism over the weekend from Foreign Secretary William Hague and US Secretary of State Hillary Clinton, who both expressed concern over the impact that the decision would have on the prospects of peace talks. This morning, the Independent online reports that UN Secretary General Ban Ki-moon has also delivered a sharp condemnation of Israel’s construction plans.

Elsewhere in the region, the online editions of the Times, Guardian and Financial Times include reports on the continuing unrest in Egypt. After a weekend of protests by both supporters and opponents of President Mursi, the country’s top judges effectively went on strike yesterday after claiming that they were unable to reach the courthouse where they were due to rule on the legality of the assembly which drafted Egypt’s controversial new constitution, after the building was surrounded by government supporters.

The continuing violence in Syria is covered by the online editions of the Telegraph and Financial Times as after a car bomb in Homs was reported to have killed at least fifteen people, while fighting around Damascus intensified and Syrian shells landed in a Turkish border town over the weekend. Yesterday, the Sunday Times included an interview with Syria’s most senior army defector who warned that President Assad may use his arsenal of chemical weapons to prevent his downfall.

The diplomatic fallout from the Israeli government’s decision to approve construction of around 3,000 homes in East Jerusalem and the West Bank is the top story in Haaretz, which claims that the UK and France are considering recalling their ambassadors to Israel in protest at the decision. Israel Radio News also reports that several European countries have expressed their objections to Israel’s Foreign Ministry over the announcement. Meanwhile, the lead story in Yediot Ahronot claims that Chicago mayor Rahm Emanuel, a close associate of President Obama, criticised Prime Minister Netanyahu over the weekend for his perceived support for Mitt Romney during the US election campaign.

Meanwhile, Haaretz, Makor Rishon and Israel Hayom prominently feature news that Tzipi Livni’s Hatnuah party is firming up its list of Knesset candidates with former Labour Party chairman Amram Mitzna having joined the slate and prominent national-religious figures Elazar Stern and Yoaz Hendel expected to follow suit. However, Maariv reports that the Kadima Party will attempt to block the departure of seven of its current MKs who are also set to join Hatnuah.