Washington Considers Asking Israel to Allocate Palestinian Tax Revenues to the Peace Council

SadaNews - Five informed sources revealed to Reuters that the United States is considering asking Israel to transfer part of the tax revenues it withholds from the Palestinian Authority to the Peace Council formed by U.S. President Donald Trump to fund his post-war plan for Gaza.

Three of the sources, who are officials familiar with U.S. discussions with Israel, indicated that the Trump administration has not yet decided on officially requesting this from Israel.

Two other sources, who are Palestinians knowledgeable about the talks, mentioned that the proposal stipulates allocating part of the tax revenues to a U.S.-backed transitional government in Gaza, and another part to the Palestinian Authority, contingent upon it implementing reforms.

The Palestinian Authority estimates the value of the withheld taxes to be $5 billion.

The potential redirection of Palestinian tax revenues toward Trump's reconstruction plan for Gaza, which the Palestinian government was not involved in formulating, could marginalize the Western-backed Palestinian Authority, while Israel's withholding of these funds exacerbates the financial crisis in the occupied West Bank.

The Palestinian Authority exercises limited self-governance in the West Bank but has not held any influence over Gaza since it was ousted by Hamas following a brief civil war in 2007.

Trump’s plan for Gaza has stalled due to Hamas’s refusal to disarm and the continued Israeli attacks, which undermined the ceasefire reached in October for the region.

“Money in Banks is Useless”

The Peace Council declined to comment on whether the proposal to use Palestinian tax revenues is under consideration.

An official from the council stated that they have requested all parties to utilize resources to support Trump's reconstruction plan, which is estimated to cost around $70 billion.

The official added: "This includes the Palestinian Authority and Israel. There is no doubt that depositing funds in a bank does not contribute to moving forward with the president's 20-point plan."

This appears to refer to the tax revenues of the Palestinian Authority that Israel has withheld in a long-standing dispute over payments made to Palestinians held in Israeli prisons.

Israel collects taxes on imported goods on behalf of the Palestinian Authority and is supposed to transfer these revenues under a long-standing arrangement. The Palestinian Authority uses this money to pay civil servant salaries and fund public services.

The sources did not specify how much tax money Washington is considering asking Israel to transfer to the council.

The United States and Israel have long pressured the Palestinian Authority to stop making financial payments to Palestinian prisoners and families of individuals killed by Israeli forces, citing that this encourages violence.

The Palestinians see these payments as a form of social welfare for prisoners.

In response to U.S. pressures, the Palestinian Authority announced in February 2025 that it was in the process of modifying the payment system, but the United States deemed these changes insufficient. Israel has withheld taxes it collects on behalf of the Palestinian Authority as a punitive measure, which officials say amounts to $5 billion, over half of the Authority's annual budget.

The Israeli action has caused a financial crisis in the West Bank, with the Palestinian Authority reducing salaries for thousands of government employees.

Israel accepted the United States’ invitation to join the Peace Council. The Palestinian Authority has not been invited to join the council.

Trump's plan stipulates that a Palestinian technocratic body, known as the National Committee for Gaza Management, would take control of the region from Hamas once the group disarms.

During a press conference in Jerusalem on Wednesday, Nikolai Mladenov, Trump’s peace envoy to Gaza, stated that reconstruction plans are in advanced stages.

He added: "We are working on it gradually; we are calculating costs and coordinating with donors. We are fully prepared to start in earnest whenever circumstances allow," without addressing the issue of taxes.