The United States is exploring a proposal to request that Israel redirect a portion of the tax revenues it has withheld from the Palestinian Authority toward President Donald Trump’s Board of Peace, Reuters reported on Friday.
According to five sources familiar with the matter and quoted in the report, the repurposed funds would be used to finance Washington’s comprehensive post-war reconstruction blueprint for the Gaza Strip.
While the Trump administration has not yet finalized a formal request to the Israeli government, the initiative aims to unlock billions in frozen capital to kickstart stabilization efforts. Under the tentative framework, a fraction of the funds would be allocated to a US-backed transitional administration in Gaza, while the remainder would be released to Ramallah contingent upon rigorous institutional reforms.
The revenues in question stem from custom duties and import taxes collected by Jerusalem on behalf of the Palestinian Authority under long-standing economic protocols.
Israel has regularly frozen these transfers due to the PA’s persistent policy of distributing financial stipends to imprisoned terrorists and their families, a system which has come to be known as “pay-to-slay”.
Despite Ramallah’s claims of introducing structural modifications to the welfare system in February 2025, both Washington and Jerusalem have maintained that the adjustments are insufficient. Palestinian Arab officials estimate the total amount of withheld revenue has now accumulated to $50 million.
Even as the world has continuously criticized the “pay-to-slay” system, PA officials have remained defiant about the issue of payments to terrorists and have made clear that the PA will never cease paying terrorists’ salaries.
PA chairman Mahmoud Abbas has in the past called the payments to terrorists a “red line” that would not be halted under any circumstances.
The Board of Peace declined to explicitly confirm whether the tax redirection proposal was actively being debated, but an official emphasized the necessity of mobilizing all regional assets to fund the President’s $70 billion stabilization 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 stated, according to Reuters.
The potential redirection of these revenues directly to the Board of Peace further diminishes the political standing of the Western-backed PA. The Ramallah-based leadership has exercised zero administrative control over the Gaza Strip since being violently ousted by the Hamas terrorist organization in 2007.
Implementation of the broader American initiative has faced significant headwinds due to Hamas’s categorical refusal to disarm, alongside ongoing security operations that have complicated the ceasefire framework established last October.
Under the Trump administration’s vision, a specialized governing body composed of Palestinian technocrats, designated as the National Committee for the Administration of Gaza, would assume administrative control only after terrorist factions completely surrender their arsenals.
During a press briefing in Jerusalem, Nickolay Mladenov, the Board of Peace envoy for Gaza, indicated that operational planning for the territory’s rehabilitation is moving forward rapidly, irrespective of the political disputes surrounding the frozen tax revenues.
“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 stated.
(Arutz Sheva-Israel National News’ North American desk is keeping you updated until the start of Shabbat in New York. The time posted automatically on all Israel National News articles, however, is Israeli time.)
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