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The U.S. is considering asking Israel to transfer part of the Palestinian tax revenue it is withholding from the Palestinian Authority to Donald Trump’s Board of Peace to help fund the U.S. president’s post-war plan for Gaza, Reuters reported, citing five sources familiar with the matter.
The Trump administration has not yet decided whether to make a formal request to Israel, three sources with knowledge of U.S. deliberations with Israel said.
Two other sources, Palestinians with knowledge of the talks, said that under the proposal, part of the money would go to a U.S.-backed transitional government for Gaza, while other funds would be transferred to the Palestinian Authority if it carries out reforms.
The Palestinian Authority says the amount of tax revenue being withheld is $5 billion.
The possibility of using Palestinian tax money for Trump’s Gaza reconstruction plan could further sideline the Western-backed Palestinian Authority, which has had no input in the plan.
Israel’s withholding of the funds has also triggered a financial crisis in the occupied West Bank.
The Palestinian Authority exercises limited self-rule in the West Bank but has not had influence over Gaza since it was expelled from the territory after a brief civil war with Hamas in 2007.
Trump’s Gaza plan has been stalled by Hamas’ refusal to lay down its weapons and by continued Israeli attacks in Gaza that have undermined an October cease-fire.
The Board of Peace declined to comment on whether a proposal to use Palestinian tax money was under consideration.
A Board official said it had asked all parties to use resources to support Trump’s rebuilding plan, 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.
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Israel collects taxes on imported goods on behalf of the Palestinian Authority and is supposed to transfer the revenue under a longstanding arrangement.
The Palestinian Authority uses the funds to pay civil servants and finance public services.
The sources did not say how much of the withheld tax money Washington was considering asking Israel to transfer to the Board of Peace.
The U.S. State Department, Israeli government and Palestinian Authority did not immediately respond to requests for comment.
The U.S. and Israel have long pressured the Palestinian Authority to end payments to Palestinian prisoners and families of Palestinians killed by Israeli forces, arguing that the payments encourage violence.
Palestinians consider the payments a form of welfare for inmates they regard as national heroes.
In response to U.S. pressure, the Palestinian Authority said in February 2025 that it was reforming the payment system, but the U.S. said the changes did not go far enough.
As punishment, Israel has withheld taxes it collects on behalf of the Palestinian Authority. Palestinian officials say the amount has reached $5 billion, more than half of the authority’s annual budget.
The move has caused a financial crisis in the West Bank, where the Palestinian Authority has cut salaries for thousands of civil servants.
Israel accepted a U.S. invitation to join the Board of Peace, while the Palestinian Authority was not invited.
Under Trump’s plan, a group of Palestinian technocrats called the National Committee for the Administration of Gaza would take control of Gaza from Hamas as the group lays down its weapons.
Nickolay Mladenov, Trump’s Board of Peace envoy for Gaza, said at a news conference in Jerusalem on Wednesday that reconstruction planning was in advanced stages.
“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.
He did not mention the tax issue.
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