The United States is considering asking Israel to transfer part of the tax revenues withheld from the Palestinian Authority (PA) to Donald Trump’s Board of Peace to help fund Gaza’s post-war reconstruction, according to five sources familiar with the discussions.
Three of the sources, officials aware of ongoing U.S.-Israeli deliberations, said Washington has yet to decide whether it will formally request the transfer. Two Palestinian sources familiar with the matter said the proposal would see some of the funds channelled to a U.S.-backed transitional administration in Gaza, while the remainder would go to the PA on the condition that reforms are implemented.
The PA says Israel is withholding around $5 billion in tax revenues.
The possibility of Palestinian tax money being used to finance Trump’s Gaza initiative without consultation with the Palestinian leadership could further marginalise the Western-backed PA, particularly as the freezing of funds has fuelled a financial crisis in the occupied West Bank.
The PA maintains limited self-rule in the West Bank but has had no authority in Gaza since Hamas expelled it following a brief internal conflict in 2007.
Trump’s Gaza reconstruction proposal, intended for the territory devastated by more than two years of war, has stalled amidst Hamas’ refusal to disarm and continued Israeli military operations that have weakened an October ceasefire agreement.
The Board of Peace declined to comment directly on whether the use of Palestinian tax funds was under consideration.
However, a Board official said all parties had been encouraged to contribute resources towards Trump’s estimated $70 billion rebuilding plan.
“That includes the Palestinian Authority and Israel. There is no doubt that money held in a bank does nothing to further the President’s 20-Point Plan,” the official said, appearing to refer to the frozen PA tax revenues.
Under longstanding agreements, Israel collects taxes on imported goods on behalf of the PA and is expected to transfer the funds regularly. The PA relies heavily on this revenue to pay public sector salaries and maintain essential services.
The sources did not specify how much of the withheld money Washington may seek to redirect to the Board.
Neither the U.S. State Department, the Israeli government nor the Palestinian Authority immediately commented on the matter.
Washington and Israel have repeatedly pressured the PA to end payments made to Palestinians imprisoned by Israel and to families of those killed by Israeli forces, arguing that the policy incentivises violence. Palestinians, however, regard the payments as social support for individuals they consider national figures.
In February 2025, the PA announced reforms to the payment system in response to U.S. demands, but Washington said the measures were insufficient. Israel subsequently continued withholding the tax revenues, which Palestinian officials say now total more than half of the PA’s annual budget.
The financial strain has forced the PA to reduce salaries for thousands of civil servants across the West Bank.
Israel has agreed to participate in the Board of Peace initiative, while the PA was not invited to join.
Under Trump’s proposed framework, a body of Palestinian technocrats known as the National Committee for the Administration of Gaza would assume control of the enclave from Hamas once the group disarms.
Speaking in Jerusalem on Wednesday, Trump’s Board of Peace envoy for Gaza, Nickolay Mladenov, said reconstruction preparations were well advanced.
“We’re doing it sector by sector. We’re costing things. We’re coordinating with donors and we’re ready to begin in earnest once the conditions allow it,” Mladenov said, without referring to the tax revenue issue.
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