Jerusalem city officials have notified East Jerusalem residents living beyond the separation fence that they are no longer required to pay municipal taxes, the official Palestinian news agency reported on Thursday.

Citing a report by the rights group Center for Social and Economic Rights, the Wafa Palestinian news agency said that the city of Jerusalem were notified residents of these areas that they do not have to pay municipal taxes, known as arnona tax, after years of paying it.

The rights group told Wafa that the new policy was aimed "at getting rid of thousands of Jerusalem residents who live behind the wall from the city," citing a municipality official announcing in 2010 that the separation fence would "isolate 55,000 Jerusalem residents."

East Jerusalem residents have long complained of ill treatment by the Jerusalem municipality, claiming that, while the neighborhoods on the eastern side of the separation fence were considered part of Jerusalem, they were not funded or maintained as such.

Earlier this year, the High Court of Justice has given the government five years to find enough classroom space for East Jerusalem children, or it will have to pay private schools to take care of the matter.

The Association for Civil Rights in Israel had filed a petition on behalf of parents who could not register their children in the city's public-school system because of a lack of classrooms. The association says the shortage means many children must be turned away each year.

"The High Court ruled today in no uncertain terms that free education for all is not just a slogan but the state's obligation to all children, including those in East Jerusalem," said attorney Tali Nir, who represented the parents for the civil rights organization.

Some 40,000 out of nearly 80,000 school-age children in question are registered in the public-school system; the rest study in private schools or do not attend school at all. It is estimated that 9,000 children are not registered at all, whether publicly or privately.

The lack of classrooms forces many families to send children to private schools that charge tuition of thousands of shekels a year. According to the petition, if the government cannot operate enough public schools in East Jerusalem, it must compensate parents for private-school fees.

Justices Ayala Procaccia and Yoram Danziger and High Court President Dorit Beinisch accepted the petition. Procaccia wrote in the decision that "the right of children in East Jerusalem to a free education is not being met, and at this stage there is no way for the authorities to provide the solution that is their responsibility by law: to grant each child a free education."

Procaccia wrote that "this situation damages the legal right of children in East Jerusalem to an equal education," calling this "an injury to human dignity" and "an affront to the law."

According to Beinisch, "Over many years, not enough resources have been budgeted by the municipality that could reduce the gap between what is demanded by law and the current situation in which tens of thousands of school-age children do not receive places in the public education system."

Procaccia wrote that the authorities are aware of the situation and are acting to remedy it, "but the pace of activity and the resources allotted indicate that the solution to this difficult and complex problem will only be partial in the coming years."

The justices therefore instructed the state to pay private schools directly whenever a pupil who sought to register in the public-school system was rejected because of a lack of space.