US weighs using Palestinian tax funds for Trump’s Gaza plan

The United States is considering asking Israel to transfer a portion of tax revenues it is withholding from the Palestinian Authority (PA) to Donald Trump’s Board of Peace in order to help finance the U.S. president’s post-war plan for Gaza, five sources familiar with the matter told Reuters.

Three of the sources, officials with knowledge of U.S. deliberations with Israel, said the Trump administration has not yet decided whether to make a formal request. Two other sources, Palestinians familiar with the discussions, said the proposal envisions allocating part of the funds to a U.S.-backed transitional government in Gaza, while another portion would go to the PA if it implements reforms.

The PA estimates that Israel is currently withholding around $5 billion in tax revenue. The potential redirection of these funds toward Trump’s Gaza reconstruction plan—without input from the Palestinian leadership—could further marginalise the Western-backed PA, particularly as the withholding has already triggered a financial crisis in the occupied West Bank.

The PA exercises limited self-rule in the West Bank but has had no authority in Gaza since it was expelled following a brief civil war with Hamas in 2007.

Trump’s Gaza plan, aimed at rebuilding the enclave after more than two years of war, has been hindered by Hamas’s refusal to disarm and by continued Israeli military operations that have undermined an October ceasefire.

The Board of Peace declined to comment on whether it is considering using Palestinian tax funds. However, a Board official said it had encouraged all parties to mobilize resources for the reconstruction effort, which is estimated to cost $70 billion.

“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.

The remark appeared to refer to the tax revenues Israel collects on imported goods on behalf of the PA under a longstanding arrangement, which are supposed to be transferred to the Palestinian administration. These funds are typically used to pay civil servants and support public services.

The sources did not specify how much of the withheld money Washington might seek to redirect. The U.S. State Department, the Israeli government, and the PA did not immediately respond to requests for comment.

The United States and Israel have long pressured the PA to end payments to Palestinian prisoners and the families of those killed by Israeli forces, arguing that such payments encourage violence. Palestinians, however, view them 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. pressure, but Washington said the changes were insufficient. Israel subsequently continued withholding the tax revenues, which Palestinian officials say now total about $5 billion—more than half of the PA’s annual budget.

The resulting financial crisis has forced the PA to cut salaries for thousands of civil servants in the West Bank.

Israel has accepted a U.S. invitation to join the Board of Peace, while the PA has not been invited.

Under Trump’s plan, a group of Palestinian technocrats known as the National Committee for the Administration of Gaza would assume control of the territory from Hamas once the group disarms.

Nickolay Mladenov, the Board of Peace envoy for Gaza, said at a press conference in Jerusalem on Wednesday that reconstruction planning is at an advanced stage.

“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 mentioning the tax issue.

By Tamilla Hasanova