MFA CITES MAJOR PROGRESS ON TAXATION ISSUES IN

C O N F I D E N T I A L TEL AVIV 000931

SIPDIS

E.O. 12958: DECL: 04/26/2019
TAGS: PREL PGOV KIRF IS
SUBJECT: MFA CITES MAJOR PROGRESS ON TAXATION ISSUES IN
TALKS WITH VATICAN

REF: VATICAN 57

Classified By: PolCouns Marc Sievers for reasons 1.4 (b,d)


1. (C) Summary: MFA Director for Religious Affairs Bahij
Mansour told Poloff April 27 that the most recent (April 24)
working-level talks between Israel and the Vatican resulted
in significant progress on several outstanding taxation
issues, including an agreement in principle that the Vatican
will not be subject to real estate tax for Church properties
where no businesses are operating. While noting that GOI
principals still need to examine the deal, Mansour was
hopeful that it could be adopted at the April 30 plenary
talks in Jerusalem. While Mansour has in the past described
progress that failed to materialize, the GOI is interested in
delivering on at least some aspects of the negotiations in
advance of the Pope's May visit to Israel. End summary.


2. (C) MFA Director for Religious Affairs and chief GOI
negotiator with the Vatican Bahij Mansour told Poloff April
27 that the most recent (April 24) working-level talks
between Israel and the Vatican over implementation of the
1993 Fundamental Agreement resulted in significant progress
on several outstanding taxation issues. While refusing to
divulge many details, Mansour noted that during the talks,
the fiscal working group of the GOI's interagency negotiating
team offered the Vatican a deal on real estate taxes
("arnona") that would exempt those church properties where no
businesses are operating from real estate tax. Mansour added
that progress had also been made on other forms of direct and
indirect taxation, but he declined to provide details, citing
the need for GOI principals to consider the negotiating
team's offer before revealing its content to any third
parties.


3. (C) If all goes well, Mansour said, the April 30 plenary
session in Jerusalem -- to be headed by MFA Deputy FM Danny
Ayalon and Holy See Undersecretary for Relations with States
Pietro Perolin -- could result in the signing of a fiscal
agreement which GOI negotiators hope to promote as a sign of
Israel's good faith and a deposit on the progress they hope
to make in the near future on other outstanding issues. He
suggested this progress would contribute to a positive
atmosphere for Pope Benedict XVI's upcoming (May 8-15) visit
to Israel, Jordan and the Palestinian territories.


4. (C) Comment: Mansour's account of a breakthrough on
taxation is welcome news, if true. However, Mansour has in
the past not done a very good job of reading the satisfaction
level of his Vatican counterparts, or of predicting what
kinds of concessions his political bosses will tolerate. At
the same time, and weighing in support of Mansour's rosy
outlook, the GOI remains deeply interested in making visible
progress toward concluding the Fundamental Agreement ahead of
the Pope's visit. While it appears unlikely that the sides
will be able to breach all their outstanding differences, a
sub-agreement on taxation would add a positive note to the
Papal visit and re-energize both sides toward a near-term
conclusion to these seemingly endless negotiations.

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Visit Embassy Tel Aviv's Classified Website:
http://www.state.sgov.gov/p/nea/telaviv
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CUNNINGHAM