US mulls pressing Israel to give withheld Palestinian taxes to rebuild Gaza

The Trump administration is reportedly considering pushing Israel to hand over frozen Palestinian tax revenue to help fund the reconstruction of the Gaza Strip.

By World Israel News Staff

The Trump administration is considering asking Israel to transfer part of the Palestinian tax revenue it is withholding to President Donald Trump’s Board of Peace to help finance his post-war plan for Gaza, according to people familiar with the discussions.

No final decision has been made on whether Washington will formally raise the request with Israel, according to a report published oFriday by Reuters, citing officials familiar with US deliberations.

Palestinian sources briefed on the discussions said the proposal under consideration would direct some of the funds to a US-backed transitional administration for Gaza, while other money could be transferred to the Palestinian Authority if it carries out reforms.

The Palestinian Authority says Israel is withholding about $5 billion in tax revenue it collected on the PA’s behalf. The funds are a major source of income for the PA, which uses them to pay public-sector salaries and finance basic services in Judea and Samaria.

The possibility that Palestinian tax money could be redirected toward Trump’s Gaza reconstruction plan would mark a new point of friction over the future of the territory. It could also deepen the PA’s marginalization, even as the withholding of the money has helped trigger a severe fiscal crisis for the Ramallah administration.

Trump’s post-war plan for Gaza has been slowed by Hamas’ refusal to disarm and by continued Israeli military activity in the territory, which has strained an October ceasefire.

The plan envisions Hamas handing power to a body of Palestinian technocrats known as the National Committee for the Administration of Gaza.

A Board of Peace official declined to say whether the tax revenue proposal was under consideration, but said all parties had been asked to mobilize resources for the reconstruction plan, whose cost has been estimated at $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.

Israel collects customs and other import taxes for the PA under a longstanding arrangement, along with income taxes withheld from Palestinian Authority residents employed in Israel.

But it has withheld large sums during a dispute over payments the PA makes to jailed Palestinian terrorists and to families of Palestinian terrorists killed during attacks on Israelis.

The PA announced changes to the payment system in February 2025 under US pressure, but Washington said that despite the reforms, the PA has effectively maintained the so-called “pay-to-slay” payment system. Israel has continued withholding the funds, leaving the PA unable to pay full salaries to thousands of civil servants.

The US State Department, the Israeli government and the PA did not immediately respond to requests for comment, according to Reuters.

Israel has accepted a US invitation to join the Board of Peace. The PA was not invited.

Nickolay Mladenov, Trump’s Board of Peace envoy for Gaza, said Wednesday in Jerusalem that reconstruction planning was moving ahead.

“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 addressing the tax revenue issue.