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After more than a decade of negotiations, Israel and the Vatican are nearing an agreement on a longstanding tax dispute over Church properties in the Holy Land, senior Foreign Ministry officials said Monday.
"Over the last two years we have made great progress on all the issues of contention, especially on the issue of taxation," said Bahij Mansour, director of the ministry's Religious Affairs Department. "We are 85-90 percent there," he said, adding that most of the points of dispute would be resolved in an April meeting between the two sides.
However, in a telephone interview on Monday with The Jerusalem Post, Ambassador to the Vatican Motti Lewy said, "There is no doubt that we've made great progress, but it is unlikely that we will conclude the agreement before the pope's visit."
The Holy See and Israel established diplomatic relations in 1993, after centuries of poor relations between Jews and the Vatican stemming from anti-Semitism.
But relations between the two sides have clouded as a result of the decade-old tax dispute and the intermittent restrictions on Arab clergy travelling from the West Bank - restrictions occasionally imposed by Israel for security reasons.
More recently, relations have been hampered by the controversial reinstatement of a Holocaust-denying bishop.
Legal contentions also remain. Still unresolved is the issue of the legal structure of Church authority in the Holy Land, which had been agreed upon but never confirmed by the Knesset.
There is also another historical focus to the disagreement, although it is not currently being discussed by the two sides.
The argument centers on the figure of Pius XII, the pontiff who reigned from 1939 until his death in 1958. According to Israel, Pius did not do enough to save Jews from the Holocaust, even when news of Nazi death camps reached the Vatican.
The Vatican has always claimed that Pius worked diplomatically to save Jews during the Holocaust, and recently has put him on the path to sainthood.
A caption accompanying a photograph on display at Jerusalem's Yad Vashem Holocaust Museum illustrates the Israeli point of view, and as a result, Pope Benedict XVI will not tour that section during his visit to the memorial.
A Yad Vashem spokeswoman said on Monday that Benedict will, however, follow the same route as his predecessor during his visit to the memorial. This will include a visit to the Hall of Remembrance, where a ceremony and speech will be held.
At the core of the tax dispute is hundreds of millions of shekels owed to the city by the Vatican and an array of Christian churches, Jerusalem municipal officials said.
According to law, properties that are used as houses of prayer are exempt from property taxes, but the churches, which own vast tracts in Jerusalem, are required to pay for buildings they own that are not used for worship - including hostels, guest houses and schools.
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 was frozen pending ongoing negotiations between Israel and the Vatican.
Any agreement reached between the Prime Minister's Office and the Vatican will be precedent-setting, since it will apply to all church properties in Jerusalem.
"The very fact that the papal visit is taking place, despite the crises, both small and large, we have had over the last six months, is an accomplishment in and of itself," Lewy concluded.