Debt Crisis Leaves Nothing Sacred as Italy Church Chased on Tax

Debt Crisis Leaves Nothing Sacred
Italy would gain an additional 100 million euros from increasing levies on the church to include all its commercial property, said Paolo Berdini, urban planner and consultant for local administrations. Photographer: Chris Ratcliffe/Bloomberg

Nothing may prove to be untouchable in the European debt crisis.

The Catholic Church in Italy is under pressure from both governing and opposition politicians to start paying taxes on all its commercial property after Prime Minister Mario Monti asked Italians to swallow 20 billion euros ($25.5 billion) of budget cuts and pay a levy on their homes.

“The church has always been the target of harsh polemics, but the pressure has never been so high,” said Francesco Perfetti, professor of contemporary history at the Luiss University in Rome. “The debt crisis is forcing governments to reconsider even those privileges that were deemed sacrosanct.”

Religion’s role in the economy is being scrutinized as nations endure some of the most severe budget cuts in a generation and where the subject of clerical wealth has long been taboo. Greece taxes income from the Orthodox Church, though exemptions remain.

Italy would gain an additional 100 million euros from increasing levies on the church to include all its commercial property, said Paolo Berdini, urban planner and consultant for local administrations. ARES 2000, a research company in Rome, put the figure as high as 2.2 billion euros.

A tax would send “the right signal,” Nicola Marinelli, who oversees $153 million at Glendevon King Asset Management in London, said in an e-mail. “It’s unclear how much income it would generate for the state, but firstly, every little bit helps, and secondly, it would be easier for the rest of society to accept the sacrifices it is being asked to undertake.”

Radical Approach

The Catholic Church owns about 100,000 properties in Italy, a third of which are commercial, according to the Italian Radicals party, which historically has challenged the church.

“We need to change the law and establish a sensible principle: all commercial activities, no matter who runs them, have to pay taxes,” Mario Staderini, secretary of the party, said in an interview. “Otherwise there is unfair competition with those who runs a business without a religious signboard.”

Support for change also comes from Environment Minister Corrado Clini, who said last month in a speech in Genoa that the church must pay because there is “no room for privileges.”

Ambiguous Law

The church must pay property tax on buildings that are designated as “purely commercial,” based on an Italian law originating 20 years ago and extended in a 2006 amendment. The wording is ambiguous when it comes to clinics that have a chapel or monasteries that offer bed and breakfast accommodation and leaves room for “undeserved exemptions,” said Ugo Arrigo, an economics professor at Bicocca University in Milan.

“The Church really wants to respect the obligations that we have with the State and with the citizens,” Beniamino Depalma, bishop of Nola, near Naples, said in an interview.

Talks are continuing between Monti and the country’s top bishop, Angelo Bagnasco, on how to eliminate the “grey zone” around tax exemptions, daily il Corriere della Sera reported on Jan. 9. An agreement may be announced as soon as the middle of next month, the newspaper said.

Both the technocrat government, led by Monti since he was sworn in on Nov. 16, and CEI, the organization representing Italian bishops, declined to comment.

Bagnasco has signaled he would be open to looking at the issue. If there are points that need clarifying or reviewing, then there are “no prejudgments from our part,” he told reporters in the city of Genoa.

Ending Abuse

“The current norms are correct in that they recognize the social value of activities carried out by many nonprofits, among them church ones,” Bagnasco said. “It is also correct that if there have been concrete cases in which a tax that should have been paid wasn’t, the abuse is verified and end it.”

Monti has pushed through an austerity package that includes an overhaul of the pension system, higher gasoline prices and additional taxes on luxury goods. The plan, which won final approval by the Italian Parliament on Dec. 22, reinstates a tax on homes abolished by the previous government, known as the ICI.

“The current government has one very clear assignment and that is cleaning up the economic and financial mess,” Sophie in’t Veld, a Dutch member of the European Parliament who chairs the platform for Secularism in politics, said in a Dec. 22 phone interview. “I would be surprised if they use their energy to pick a fight with the Catholic Church at this moment in time.”

Lateran Treaty

Catholicism lost its status as a formal state religion in a renegotiation of the Lateran Treaty in 1984. In exchange, taxpayers were given a choice to send about 0.8 percent of their income tax to religious affiliations or public coffers.

The Vatican, the world’s smallest state, swung to a profit of 9.8 million euros in 2010 after three years of losses during the global financial crisis. About 90 percent of the country’s citizens describe themselves as Catholic, with a third of them practicing, according to the CIA World Factbook.

Properties based in the Vatican City are exempt from paying Italian taxes as they are considered part of a separate sovereign state under the original 1929 Lateran Treaty.

The Vatican pays tax on buildings that carry out commercial activities included in the Italian land registry, said spokesman Father Federico Lombardi in a Jan. 7 phone interview. Such businesses include stores.

The church should look at what people are putting up with economically and act accordingly, said Felice Belisario, a senator for Italy of Values party.

“When such serious sacrifices are being asked of ordinary people, you cannot have such unjustified exceptions,” Belisario said on his blog. “Our position is clear, render to Caesar what is Caesar’s and to God what is God’s.”

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