Full Breakdown
U.S. Mulls Redirecting Withheld Palestinian Tax Revenues to Fund Trump’s Gaza Reconstruction Plan
5/16/2026, 12:46:22 AM
Core Proposal: Redirecting Withheld PA Tax Funds to the Board of Peace
U.S. officials are weighing a request that Israel transfer a portion of the Palestinian Authority’s (PA) tax revenue, currently withheld, to Donald Trump’s Board of Peace for use in the administration’s post-war reconstruction plan for Gaza. No formal request has been made.
Background & Context
Israel collects customs and value-added taxes for the PA under a longstanding arrangement. Since February 2025 it has withheld the funds, citing U.S. pressure on the PA to end payments to Palestinians imprisoned by Israel and to families of those killed—payments Washington and Jerusalem say encourage violence. The PA estimates the withheld amount at $5 billion, over half its annual budget, sparking a financial crisis in the West Bank and salary cuts for thousands of civil servants. The Trump administration’s 20-point Board of Peace plan envisions a $70 billion reconstruction effort in Gaza, contingent on a U.S.-backed transitional government and Hamas disarmament.
Key Actors and Core Data
Key actors include President Donald Trump (architect of the 20-point Gaza plan), the Board of Peace (U.S.-backed reconstruction body), its Gaza envoy Nickolay Mladenov, the Palestinian Authority (source of the withheld $5 billion), the Israeli government (tax collector), and Hamas (Gaza’s de-facto ruler whose disarmament is required). The withheld tax revenue is $5 billion, over half the PA’s annual budget, while reconstruction estimate stands at $70 billion; salary cuts affect thousands of civil servants.
Official Statements & Responses
A Board of Peace official said “money held in a bank does nothing” for President’s plan. Nickolay Mladenov told reporters that reconstruction is proceeding “sector by sector” and will begin once conditions allow. The Board declined comment on the tax-transfer idea.
Criticism & Opposition
Palestinian officials argue that diverting PA tax money to a U.S.-led reconstruction effort would further marginalize the PA, which has had no input on the plan. The withholding already strains public services in the West Bank, raising humanitarian concerns about repurposing the funds.
Conflicting Reports & Gaps
Sources did not specify how much of the $5 billion Washington might seek to redirect. No comment was obtained from the State Department, Israeli officials, or the PA.
Verbatim Quotes
- “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,” — Board of Peace official
- “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,” — Nickolay Mladenov, Board of Peace envoy for Gaza
- “The PA puts the amount of tax being withheld at $5 billion.” — Palestinian Authority
- “Related TRT World - Here are 4 things to know about Gaza’s stalled peace plan ‘Money held in a bank does nothing’ The Board of Peace declined to comment on whether a proposal to use Palestinian tax money was under consideration.” — Board of Peace
What's Next
Reconstruction planning proceeds pending Hamas disarmament and a halt to Israeli attacks. The United States is expected to decide in the coming weeks whether to formalize its request to Israel.
