U.S.-CZECH S&T AGREEMENT: TIME TO COME TO CLOSURE

UNCLAS PRAGUE 001227

SIPDIS

SIPDIS

STATE FOR OES (DAUGHERTY),L/OES (BURTON),EUR/NCE (FICHTE)

E.O. 12958: N/A
TAGS: KTIA KSCA PREL EZ
SUBJECT: U.S.-CZECH S&T AGREEMENT: TIME TO COME TO CLOSURE
ON TAX LANGUAGE


1. This is an action request, see para 4.


2. The U.S. and the Czech Republic have been negotiating a
new Science and Technology Agreement since 2003. The sole
unresolved issue is language covering taxation of assistance
funds. EU regulations do not permit the Czechs to conclude
an agreement that waives taxes on assistance. However, the
Czech government states that it will not use its own
assistance funds on scientific cooperation with the U.S., and
adds that it believes the U.S. is not using American
assistance funds to cover scientific activities in the Czech
Republic. Therefore, Prague would like to sign an agreement
that specifically excludes projects that use assistance
funds, but would cover all other forms of cooperation. The
agreement proposed by the Czechs would not contain any
language guaranteeing the waiving or reimbursement of
taxation of assistance funds. If projects using American
assistance funds were to be proposed at a later date, the
Czechs have indicated a willingness to discuss ad hoc
mechanisms to deal with the issue of taxation.


3. Embassy Prague believes the Czech proposal is the most
practical and expedient way to move the agreement to
conclusion. We believe no U.S. institutions are currently
carrying out scientific activities in the Czech Republic that
rely on U.S. assistance funds. We have directly contacted a
number of agencies, including the National Science
Foundation, the National Institute of Health, the
Environmental Protection Agency, and NASA. USAID closed its
office in the Czech Republic in 1997. SEED funds were last
obligated in 2004.


4. It is time to bring this agreement to closure. Embassy
requests Department approval to notify the Czech side that
the USG is prepared to conclude the agreement in a manner
that does not include projects funded with government
assistance, using language similar to what was agreeed to in
the 2005 S & T Agreement with Poland:

"The Parties do not foresee the provision of foreign
assistance under this agreement. If they decide otherwise,
with respect to a particular activity, the relevant
implementing arrangement would need to be consistent with the
requirements of laws of the United States and the Czech
Republic that regulate activities related to foreign
assistance."


GRABER