MFA SEEKS WAY TO HELP LUTHERAN HOSPITAL TO STAY

C O N F I D E N T I A L TEL AVIV 005703

SIPDIS

E.O. 12958: DECL: 09/15/2015
TAGS: PGOV PHUM KIRC ECON IS GOI INTERNAL
SUBJECT: MFA SEEKS WAY TO HELP LUTHERAN HOSPITAL TO STAY
SOLVENT

Classified By: Political Counselor Norman Olsen for reasons 1.4 (b,d).


1. (C) MFA Director of the Division for Religious Affairs
Zvi Tal (protect) told Embassy Poloffs and visiting NEA/IPA
Poloff September 14 that the GOI wishes to find a "discreet
way" to ensure that the Augusta Victoria Hospital in
Jerusalem, run by the Lutheran World Federation (LWF),
remains in operation despite a 2002 Jerusalem District Court
decision revoking the hospital's tax exempt status and
imposing several years worth of back taxes.


2. (C) Tal said that MFA officials met with LWF President
Bishop Mark S. Hanson during the LWF Council's August
31-September 6 annual meeting in Jerusalem, and told Hanson
openly that the MFA believes it is in its "best interest"
that the hospital "continue and even enlarge its operations."
Tal said that, in addition, the MFA instructed the Israeli
Ambassador to Geneva to approach the LWF Secretariat there to
recommend that the church try to reach an out-of-court
settlement because the MFA believes it is likely that the
Supreme Court will uphold the District Court decision. Tal
said that the GOI now plans to convene an interministerial
meeting to see whether a way exists to funnel assistance to
the LWF to offset its tax expenses. Tal explained that the
LWF is actually entitled to state assistance and can ask for
budgetary aid on a permanent basis or for an earmarked
project.

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Background
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3. (C) A 1966 agreement between Jordan and the Lutheran
World Federation conferred tax exempt status on Augusta
Victoria hospital. This status was then recognized by Israel
in 1967 in practice, but never in law. The District Court
decided in December 2002 that the 1966 Jordanian agreement is
not valid pursuant to a 1978 law requiring all tax exemptions
to be based on Israeli law. Since the agreement was never
turned into law, Tal explained, the court revoked the
hospital's privilege. According to Tal, the District Court
also decided that the LWF must pay back-taxes from 2001,
amounting to what Tal said is about USD one million. The
Supreme Court is scheduled to hear the LWF's appeal on
December 1, 2005.


4. (C) LWF Jerusalem Director Mark Brown told ConGen Poloff
August 31 that the LWF feels that the GOI is acting in bad
faith, as he said that the GOI specifically agreed in 1967 to
exempt the LWF from taxation, as had been previous practice
under Jordanian rule and the British Mandate, but now is
using internal legal technicalities to violate its agreement.
Brown said that the LWF has no interest in the specific
means by which the GOI resolves its internal legal disputes
to honor its agreement -- only in the result. He said that
the LWF "simply will not be able to provide close to our
current level of service if we have to pay the employer tax.
If we also have to pay the claimed back taxes, amounting to
millions of dollars, it will devastate and possibly end our
operations."

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