VZCZCXYZ0000
RR RUEHWEB

DE RUEHRB #0264/01 0401121
ZNY EEEEE ZZH
R 091121Z FEB 07
FM AMEMBASSY RABAT
TO RUEHC/SECSTATE WASHDC 5804
INFO RUEHCL/AMCONSUL CASABLANCA 2642

UNCLAS E F T O RABAT 000264 
 
SIPDIS 
 
NOFORN 
SENSITIVE 
SIPDIS 
 
DEPT FOR A/OPR/OS BEA CAMERON, L/BA DAVID GALLAGHER, 
NEA/MAG AND NEA/EX 
 
E.O. 12958: N/A 
TAGS: PREL PGOV EFIN SCUL MA
SUBJECT: AMBASSADOR'S MEETING WITH PRIME MINISTER JETTOU ON 
SCHOOL TAXES 
 
REF: RABAT 171 
 
¶1. (SBU/NF) Summary: In a meeting with Ambassador to discuss 
our desire to conclude a bilateral schools' agreement, Prime 
Minister Jettou took on board our concerns about the 
precarious financial situation of American schools in Morocco 
and committed to finding a solution to the tax conundrum they 
face.  He stressed, however, that their situation must be 
regularized as the law requiring payment of payroll taxes is 
"clear and strict," and noted that increasing bureaucratic 
pressure on the schools is the result of the fact authorities 
had finally taken notice that they were paying some, but not 
all required levies.  He initially suggested that a tax 
amnesty for amounts due for past years be coupled with 
agreement that the schools pay payroll taxes in the future. 
Ambassador strongly rebuffed this suggestion, noting that 
such additional levies would threaten the schools' viability. 
 Jettou thereupon undertook to ask his financial advisers to 
come up with alternative solutions.  End Summary. 
 
¶2. (SBU/NF) A week after first speaking to the Ambassador 
about the subject by telephone, Prime Minister Jettou met 
with him on the evening of February 7 to review our proposal 
for a bilateral schools' agreement, which had taken on added 
urgency as a result of efforts by tax authorities to collect 
3.75 million USD in back taxes from the Casablanca American 
School (CAS).  Jettou noted that the question of school 
payment of taxes is an issue that Moroccan authorities have 
reviewed periodically over the years.  While previously the 
"dossier was taken out, looked at, and put back," more 
recently authorities have been more agressive in pursuing it, 
as they noted that some payments were coming in from the 
schools.  That led them to question why the schools were not 
fulfilling all their obligations. 
 
¶3. (SBU/NF) Jettou said that it is important that the 
school's situation be regularized; stressing that it is not a 
question of seeking new targets of tax revenue, but rather of 
ensuring that the law is followed.  "The law is strict and 
clear," he said, and the schools should pay payroll tax for 
any teacher or staff member who is in country for more than 
183 days.  He looked coolly on suggestions that American 
teachers be treated in the same way as their counterparts at 
French and Spanish mission schools.  Teachers at the latter, 
he argued, are government employees, and are heavily taxed in 
their home country.  They do not pay tax in Morocco as a 
result of double taxation treaties.  He put much emphasis on 
the fact that American schools are private.  "The students 
pay and they invest," he said.  He did express surprise, 
though, on learning that they are non-profit, and that their 
only source of revenue is tuition. 
 
¶4. (SBU/NF) Jettou suggested as a solution that the schools 
could be subject to taxation from this year forward, and that 
tax officials would agree not to seek to recoup payments for 
previous years.  (He noted that they are permitted to do so 
for the last four years.)  Ambassador rejected this proposal 
strongly, stressing that requiring such payments would force 
the schools to close or at least drastically raise their 
tuition fees.  With tuition already at 12,000 USD per year or 
higher (Jettou noted that he had put four children through 
the Casablanca school at this rate), any additional increase 
would put them out of reach of even more Moroccans, and 
further threaten their viability.  Ambassador added that the 
schools do not believe they have been operating outside the 
law; rather they have been following the unwritten agreement 
that grew up surrounding them as a result of their initially 
closer link to the U.S. government. 
 
¶5. (SBU/NF) Jettou took these points on board and did not 
repeat his initial proposal.  He agreed that a solution must 
be found that preserves the schools and said that he would 
ask his advisers and the Ministry of Finance to develop 
something.  In closing, he stressed that nothing would happen 
in the near term. 
 
¶6. (SBU/NF) Comment: Jettou's initial proposal and emphasis 
of the need for the schools to "regularize" their situation 
and come into conformity with Moroccan law highlights the 
fact that achieving a workable settlement for the schools 
will not be easy, particularly given the fact that as the 
parent of four CAS students and a school trustee, Jettou is 
"inside the American school system."   From our meetings with 
the schools and the increasing pressure on the Casablanca 
school in particular, however, it is also clear that the 
status quo is increasingly precarious.  We remain convinced 
that the coming months offer the best window of opportunity 
 
to achieve a settlement that will protect both American and 
Moroccan interests.  End Comment. 
****************************************** 
Visit Embassy Rabat's Classified Website; 
http://www.state.sgov.gov/p/nea/rabat 
****************************************** 
 
Bush