During the opening of a two-day conference meant to discuss the overall ties and the possibility of suspending security coordination with the Israelis, Abbas addressed the Central Council of the Palestinian Liberation Organization (PLO) in Ramallah on Wednesday, describing the move as a provocation.
"How are they allowed to take away our money? Are we dealing with a state or with a gangster?" he asked.
Israel had frozen $127 million per month in Palestinian tax revenues, in protest of the Authority’s formal application for membership of the International Criminal Court (ICC), to pursue the Jewish state for war crimes.
The tax money, which covers around two-thirds of the Palestinian budget, is critical since it is used to pay tens of thousands of public sector employees.
The payments had been previously suspended too, but transferred to Palestinian authorities after a few weeks. This time, Palestinians are concerned that they will not get their revenues until after the new government is elected on March 17.
"This is the third month in a row that we're taking loans from the banks," Abbas said, adding that a "political solution" was the best way to end the deadlock.
Western diplomats are worried such a long suspension would push the Palestinian Authority to the brink of collapse, affecting stability across the occupied West Bank.
Many Palestinians have had their salaries cut by around 40 percent, causing unrest in Ramallah, Bethlehem and other West Bank cities.
Withholding the salaries of police and other personnel could jeopardize security coordination between the Israelis and Palestinian Authority that dates back to the Oslo peace accords of the mid-1990s, according to officials in Ramallah.
West Bank cities such as Hebraon, Nablus and Jenin where anti-occupation demonstrations are common could become chaotic.
"How are we going to pay the salaries?" asked Abbas, adding that as well as the tax revenues, Israel owed 1.8 billion shekels ($450 million) in unpaid salaries to Palestinians working for businesses in Israel.
Relations between Israeli Prime Minister Benjamin Netanyahu and the PA have been deteriorating after US-backed talks between them collapsed in April 2014, following nine months of fruitless meetings amid bitter recriminations and mutual blame.
In addition to withholding tax income, Israel’s state-owned electricity company has cut power to Nablus and Jenin for the past 10 days to press for $492 million it claims the Palestinian government owes, according to Reuters.
Earlier this week, the Israeli military mobilized 13,000 troops in the West Bank in a surprise drill, while Palestinians staged mass protests against economic blockade of the West Bank.
Meanwhile, Palestinians in the West Bank have begun boycotting Israeli goods. Activists visited shops and stores in order to remove Israeli goods from six companies.
While 80 percent of shops had stopped stocking Israeli commodities, the removal process did not involve products being taken by force, reported the Associated Press.
