The United States is considering asking Israel to redirect part of roughly $5 billion in Palestinian tax revenue it is withholding to help fund President Donald Trump's postwar plan for Gaza, a move that could deepen tensions with the Palestinian Authority as Washington struggles to finance a reconstruction effort estimated at $70 billion.
The idea, reported Friday by Reuters, would involve using some of the money Israel has held back from the Palestinian Authority to support Trump's U.S.-backed Gaza plan, including a transitional governing structure known as the Board of Peace. Five sources familiar with the deliberations told Reuters the proposal is under discussion, though no final decision has been announced.
The money at issue is not Israeli aid. It comes from customs duties and taxes that Israel collects on behalf of the Palestinian Authority under long-standing economic arrangements and is generally supposed to transfer to the PA. Palestinian officials say Israel is now withholding about $5 billion, a sum described as "well over half of the PA's annual budget."
That has left the Ramallah-based authority in one of its worst financial crises in years. The PA has slashed salaries for thousands of civil servants, while Palestinian officials and European diplomats have warned that the withholding of revenues risks destabilizing the West Bank.
A Board of Peace official told Reuters that all parties had been asked to leverage resources to support Trump's 20-point 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.
The proposal comes as Trump's Gaza plan faces a funding gap. According to April news reports, the Board of Peace had received only a small fraction of the $17 billion pledged for Gaza, slowing the president's effort to advance a postwar framework for the devastated enclave.
Trump said in February that members of the Board of Peace had pledged more than $5 billion for Gaza, but the larger reconstruction cost had been estimated at about $70 billion.
For the Palestinian Authority, the idea is politically explosive. The withheld funds are revenue collected on its behalf, and any U.S. request to reroute them through a Trump-backed Gaza mechanism could be seen by Palestinian leaders as using Palestinian money while sidelining the PA from the political process.
PA was not invited to Trump's Board of Peace, while Israel has joined. The outlet said the U.S. proposal could further marginalize the PA, which Western governments have long described as a potential governing alternative to Hamas in a postwar Gaza.
Israel has withheld Palestinian tax revenues for several reasons, including objections to PA payments to Palestinian prisoners and families of Palestinians killed by Israeli forces. The PA said in February 2025 that it was reforming that payment system after U.S. pressure, but Washington said the changes did not go far enough.
Israeli Finance Minister Bezalel Smotrich confirmed in April that his ministry had not transferred April's clearance revenues, totaling about 740 million shekels, or $248.7 million, continuing a policy that had been in place for about a year.
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