AMERICAN CEMETERY PROJECT HELD HOSTAGE BY GOT

C O N F I D E N T I A L TUNIS 000184

SIPDIS

PARIS AND ROME FOR ABMC

E.O. 12958: DECL: 03/30/2019
TAGS: PREL ABMC OFDP ODIP TS
SUBJECT: AMERICAN CEMETERY PROJECT HELD HOSTAGE BY GOT

REF: TUNIS 182

Classified By: Ambassador Robert F. Godec, Reason 1.5 (b) and (d)


1. (SBU) Summary: The Government of Tunisia is holding a
major improvement project at the North Africa Cemetery and
Memorial financially hostage by denying a value added tax
(VAT) exoneration request valued at 220,000 Tunisian Dinars
(about $160,000) until the US Mission begins to deduct and
report taxes to the Ministry of Finance. Active lobbying to
the contrary has not yet budged the GOT position. In the
meantime, the contractor, under direct pressure from the
Ministry of Finance, has announced its intention to stop work
unless an exemption document is produced or VAT is paid.
Unless the matter is resolved within the next two weeks, the
contractor intends to stop work. We believe that the
Department should include this issue as it addresses the tax
issues faced by the American Cooperative School in Tunis
(reftel). A major difference between the two matters is that
the cemetery is an integral part of the US Mission in Tunisia
the status of which is not in doubt. End Summary


2. (SBU) Last fall the Embassy submitted a routine VAT
exemption request on behalf of the American Battle Monuments
Commission (ABMC) involving an irrigation project valued
approximately $1 million. The VAT exemption is valued at
220,000 Tunisian dinars (currently about $160,000). The
response from the Ministry, dated January 12 and received
after an unusually long delay, granted the exemption provided
that the Mission acquire a fiscal identification number and
begin deducting and reporting incomes taxes of Embassy LES.
In addition, Ministry of Finance officials informed us
separately that they wanted the Embassy to deduct taxes from
lease payments and to report the names of the landlords with
whom we had negotiated the leases.


3. (SBU) After consultation with L, the Mission responded
on February 12 that we were unable to comply with the desires
of the GOT since it impinged upon the Mission's rights and
obligations under the Vienna Convention on Diplomatic
Relations, that the Tunisians had no such obligations in the
United States and that the United States did not carry out
what the GOT was requesting in any other country. The
Embassy formally asked that the issue of VAT for ABMC be
delinked from each other and that the VAT exoneration be
granted in a normal fashion, especially given that the
cemetery is an integral part of the US Mission in Tunisia.


4. (SBU) In a subsequent meeting between the DCM and the
Director for Protocol at the MFA, the latter blamed the
Ministry of Finance (MOF) for the situation, saying that MOF
was attempting to crack down on various problems involving
foreign missions and that Protocol was attempting to organize
a high level meeting between MFA and MOF to break through the
deadlock. The Director of Protocol described the problem as
resolvable but did not give a timeframe.


5. (SBU) The contractor hired by ABMC to undertake the
irrigation project passed word that the MOF was planning an
audit of its accounts, with particular emphasis on VAT
matters. The contractor has stated in a formal letter to
ABMC that it will need to cease work unless ABMC provides a
VAT exemption certificate or pays the VAT within the next two
weeks.


6. (C) Earlier this month, the Ambassador wrote the Minister
of Finance, asking for his direct intervention to resolve the
issue. There has been no reply. The Ambassador has also
discussed the cemetery tax issues with senior MFA officials
on several occasions, mostly recently March 26 with MFA Chief
Staff Mahmoud Khemiri and Special Assistant to the Foreign
Minister Mehrez Ben Rhouma. In that meeting, the Ambassador
emphasized that the cemetery is an integral part of the US
Embassy and has been since Tunisia's independence. The
character of the cemetery is "completely diplomatic," he
emphasized. The Ambassador noted that the United States does
not withhold taxes from the paychecks of local employees.
The conditions that the Finance Ministry is trying to impose,
he said, are in violation with the Vienna Convention on
Diplomatic Relations. The Ambassador asked again that the
GOT immediately issue the VAT exemption and stressed that
failing to do would not be well received in Washington at the
beginning of a new Administration. It could also provoke a
negative reaction in the Congress, he observed.


7. (C) Comment: This tax issue has reached the point where
it will damage the operations of the cemetery and leave it
looking in disrepair. This is not how this consecrated
ground should be treated and would be a major depature from
the respectful and helpful attitude of the GOT since the site
was completed in 1960 on land donated by the GOT under
President Bourghiba. We need to resist the current attempt
to divide one piece of the Mission from the rest and
emphasize the importance of the site to the United States.
Coming in parallel with the American school issue, the events
involving the cemetery raise once again the question of GOT
motivations. End Comment
Godec