The Vatican and an array of Christian churches in Jerusalem owe the city hundreds of millions of shekels in overdue property tax.
According to law, properties that are used as houses of prayer are exempted from paying property tax (arnona).
But the churches, which owe vast amounts of properties in Jerusalem, are required to pay the city property tax for buildings they own that are not used for worship, including hostels, guest houses, and schools, the city said.
The total amount of unpaid property tax amounts to roughly NIS 300 million, with the Latin Patriarchate the biggest offender, a city spokesman said.
The debt collection has been frozen pending ongoing negotiations between the State of Israel and the Vatican over the delicate issue.
The Vatican is said to be willing to pay only a symbolic fee for the city services they receive.
Any agreement reached between the Prime Minister's Office and the Vatican will then apply to all the various church properties in Jerusalem.
Pope Benedict XVI was expected to ask Prime Minister Ehud Olmert for a property tax discount for the churches during their meeting Wednesday.
Olmert, who previously served as mayor of Jerusalem, will determine just how much of a tax discount to offer the Vatican.