US weighs using withheld Palestinian tax money for Trump’s Gaza reconstruction plan: Report

The United States is considering whether to ask Israel to redirect a portion of tax revenues withheld from the Palestinian Authority to help finance President Donald Trump’s post-war reconstruction plan for Gaza, Reuters reported citing sources familiar with the discussions.

Five sources told Reuters that the proposal remains under internal deliberation and that no formal request has yet been made to Israel. Three of the sources, identified as officials aware of US-Israel consultations, said Washington was still assessing the political and legal implications of the move.

Two Palestinian sources familiar with the discussions said the proposal being explored would channel part of the withheld money to a US-backed transitional administration for Gaza, while another portion could eventually be released to the Palestinian Authority if it carries out governance and financial reforms sought by Washington and Israel.

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The Palestinian Authority estimates that Israel is currently withholding around USD 5 billion in tax revenues collected on its behalf.

The proposal comes amid growing scrutiny of Trump’s “Board of Peace” initiative, a US-backed mechanism launched earlier this year to oversee Gaza’s reconstruction and transitional governance following the war between Israel and Hamas. Analysts say the plan envisions large-scale redevelopment projects in Gaza backed by Gulf funding, private investment and international donors.

The Board of Peace was formally launched in January after receiving backing through a UN Security Council resolution tied to Trump’s broader Gaza peace framework. The initiative has since attracted billions of dollars in pledges from participating countries and investors for reconstruction and infrastructure projects in the enclave.

However, the prospect of using Palestinian tax revenues to fund the initiative without direct participation from the Palestinian Authority, risks further sidelining the Western-backed administration, which is already grappling with a severe financial crisis in the occupied West Bank.

The Palestinian Authority exercises limited self-rule in parts of the West Bank but lost control of Gaza to Hamas after the militant group seized the territory in 2007.

Trump’s Gaza reconstruction initiative has faced repeated setbacks including Hamas’ refusal to disarm and continued Israeli military operations despite a ceasefire agreement reached in October last year.

A spokesperson for Trump’s Board of Peace declined to comment directly on whether Palestinian tax revenues were under consideration for the project. However, a Board official said all stakeholders had been encouraged to contribute resources toward the estimated USD 70 billion rebuilding effort.

“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.

Under longstanding arrangements, Israel collects import taxes on behalf of the Palestinian Authority and is expected to transfer the revenue regularly. The Palestinian Authority depends heavily on these funds 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 under the proposal.

Washington and Israel have repeatedly pressed the Palestinian Authority to end payments to Palestinian prisoners and families of those killed by Israeli forces, arguing that the system incentivises violence. Palestinians defend the payments as welfare support for families affected by the conflict.

In February 2025, the PA announced reforms to the payment system under US pressure, but Washington reportedly considered the changes insufficient. Israel subsequently continued withholding the funds, deepening the Palestinian Authority’s financial difficulties and forcing salary cuts for public employees in the West Bank.

Israel later accepted a US invitation to join the Board of Peace, while the Palestinian Authority was not invited to participate.

Under Trump’s broader post-war framework, governance in Gaza would eventually be transferred from Hamas to a technocratic body known as the National Committee for the Administration of Gaza, contingent on Hamas surrendering its weapons.

Nickolay Mladenov, Trump’s Board of Peace envoy for Gaza, said during a press 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, without mentioning the tax issue.

With inputs from agencies