Amsterdam's City Council has agreed to pay the local Jewish community £8 million as compensation for forcing returning Holocaust survivors to pay property taxes that they had incurred while in death camps and in exile around Europe.

Mayor Eberhard van der Laan made the announcement at the opening of a new Holocaust museum in the city last week.

Survivors were ordered to pay outstanding ground rent for their properties to cover the war years, amounting to today's equivalent of between five and ten million euros. They were even charged 820,000 euros in fines for late payments.

The scandal only came to light recently, when a student discovered letters written by some of the Shoah-survivor taxpayers in the municipal archives.

The affair is now generally regarded as an example of the heartless attitude of post-war Dutch society towards Holocaust survivors. Accordingly, the amount to be returned is the highest estimate of the total paid by survivors to the city council.

Representatives of the Jewish community are positive about the council's decision, despite the fact that it has taken the city over 70 years to admit culpability.

There is, however, some controversy about where exactly the money should go.

Ron van der Wieken, chairman of the CJO, the umbrella body of Dutch Jewish organisations, said: "It's only fair that, if at all possible, the money should be returned to the people who paid it or their descendants. Whatever remains should go to the Jewish community as a whole."

He recommended that claims system be set up. "In the last 15 years, tens of millions of euros have been returned to individuals through the restitution organisation Maror. It could handle this money too."

The mayor, however, pointed out that due to incomplete documentation, it was impossible to ascertain who exactly paid the charges and fines. He said that the money should therefore be given to the Jewish community of Amsterdam collectively, and suggested it should be used to support projects such as Daniel Libeskind's Monument of Names or the newly opened Holocaust Museum.

Some Amsterdam Jews maintain that this should have been dealt with 60 years ago, when the people who paid the charges were still alive.

In an interview with the newspaper Het Parool, founded as a resistance paper during the Second World War, Mr Van der Laan said it was "inconceivable" that the council would not follow the advice of the Jewish community.

The city council will take a final decision after further consultations.