THE GOT STICKS TO ITS STORY: THE AMERICAN

C O N F I D E N T I A L TUNIS 000217 SIPDIS STATE FOR NEA/FO - HUDSON; NEA/MAG; NEA/SCA/EX; STATE ALSO FOR A/OPR/OS - CAMERON E.O. 12958: DECL: 04/07/2019 TAGS: ASCH OFDP PREL TS SUBJECT: THE GOT STICKS TO ITS STORY: THE AMERICAN SCHOOL'S TAX ISSUE IS TECHNICAL -- NOT POLITICAL REF: A. TUNISIA NOTES FROM HAYES TO GODEC ET AL 4/6/2009 ¶B. TUNIS 203 ¶C. TUNIS 191 ¶D. TUNIS 182 Classified By: Ambassador Robert F. Godec for reasons 1.4 (b) and (d) ¶1. (C) Summary: Ministry of Foreign Affairs Chief of Staff Khemiri provided the Ambassador today with a Ministry of Finance Paper that attempts to justify its tax assessment on the American Cooperative School of Tunis (ACST). Khemiri repeated many of the points GOT officials have made in previous meetings. He pleaded with the Ambassador to view the issue as a purely technical, fiscal issue, and not to view the tax assessment as politically motivated. The Ambassador made clear that the forced closure of the school would provoke a crisis that would have serious implications for our bilateral relations. End Summary. ¶2. (C) The MOF Responds: Ministry of Foreign Affairs Chief of Staff Mahmoud Khemiri summoned the Ambassador to a meeting today at which he presented the English language version of a Ministry of Finance (MOF) document that attempts to justify the tax arrears imposed on ACST. (Note: Per Ref A, the Tunisian Embassy in Washington provided the same document to NEA/MAG on April 6.) The document catalogues the MOF's claims of tax arrears amounting to 9.18 million Tunisian Dinars, and seeks to refute "unsustainable" arguments put forward by the ACST and the Embassy about the privileged status the school has historically enjoyed. ¶3. (C) It's Very Fiscal: Khemiri was accompanied by the Special Assistant to the Minister and Director General for Europe Mohamed Lessir, as well as Elyes Kasri, Director General for the Americas and Asia. The Chief of Staff repeated many of the same points that he had made when the Ambassador pressed the ACST issue during their March 26 meeting (Ref D). He reiterated that the MOF tax assessment against ACST was a "technical, fiscal" matter and not at all political, a point that Lessir echoed, saying in English, "very fiscal." Khemiri seized on the fact that the ACST had tried -- and failed -- to secure a loan to pay off the arrears, asking out loud, "So that means there is a disposition to pay?" The Ambassador pointed out that the school had merely been conducting due diligence in exploring options. He also noted that the school had conceded that it did indeed owe approximately 1 million TD, due to accounting irregularities, although it disputed the remaining assessments. ¶4. (C) The Paper Trail: The Ambassador promised to read carefully the MOF paper but stated clearly the US views the GOT actions as political. He provided his interlocutors a copy of the non-paper on the ACST (as cleared in the Department and shared in final with NEA/MAG). He again underscored the US position on the school, noting that it has been the subject of many diplomatic exchanges between the GOT and the USG, and that it has enjoyed special status. By way of example, he pointed to a copy of a 1984 diplomatic note from the MFA to the Embassy stating that teachers' salaries are not subject to tax. The Ambassador emphasized that the school's status should be the subject of bilateral discussions, not unilateral action. He again asked for bilateral negotiations on an agreement to cover the school. ¶5. (C) Grave Consequences of Closure: The Ambassador also underscored that the school, which has been preparing to celebrate its 50th anniversary this May, is a symbol of US-Tunisian friendship. The consequences for the school's bankruptcy and forced closure, he warned, would be very grave. He explained that he would have to inform all of the school's parents about the school's impending closure as early as next week. The school's closure would carry implications for the US Embassy, for other foreign missions, and for the African Development Bank. Beyond that, he made clear, the forced closure of the school would provoke a policy review in Washington of our overall relations and our bilateral assistance programs. Congress will have to be briefed and may react, too. In addition, there is likely to be negative international media coverage. ¶6. (C) Closure? Khemiri and Lessir were quick to protest: "We shouldn't be talking about the school's closure. Nobody wishes for its closure," a point to which the Ambassador responded by pointing out that closure would be the consequence if the 9.1 million dinar tax assessment is not resolved. Both Khemiri and Lessir asked the Ambassador again not to politicize this "purely technical" issue. Tunisia wants to continue to enjoy good relations with the United States, they said. Please visit Embassy Tunis' Classified Website at: http://www.state.sgov.gov/p/nea/tunis/index.c fm Godec