Cash-strapped Italy looks to tax church-owned properties

March 5, 2012

c. 2012 Religion News Service
VATICAN CITY (RNS) Pinched by the global recession and tough-love budget
demands of the European Union, the Italian government is looking for extra
revenue, and has its eyes set on commercial properties owned by the Roman
Catholic Church.

On Feb. 15, the government of Prime Minister Mario Monti announced it
wants to revise rules on the tax-exempt status of church-owned commercial
property. Though the exemption also applies to other not-for-profit entities,
such as trade unions, political parties and religious groups, the Catholic
Church is its largest beneficiary.

"Such a move would have been unimaginable six months ago," said Francesco
Perfetti, a history professor at LUISS University in Rome. "After all, no
matter whether you are a believer or not, the church is an integral part of
Italy's culture."

The exemption, introduced in 1992, has sparked a heated debate, especially
after the Euro crisis and Italy's staggering debt forced the government to
introduce sweeping austerity measures, including a sharp rise in the
pension age.

Critics say the current rules give church-owned businesses, such as hotels
and restaurants, an unfair advantage over their competitors.

Church officials respond that purely commercial church businesses must
already pay taxes in full, and that the exemption is aimed at helping social
institutions like schools and hospitals, not at giving the Catholic Church
an unfair advantage.

"We don't ask for preferential treatment but just to be treated as other
not-for-profit entities," Cardinal Angelo Bagnasco, president of Italy's
bishops conference, said in January.

In fact, Italian church officials cautiously welcomed the government's
announcement, saying it would help "clarify" the situation.

In a reflection of the sensitivity surrounding every issue related to the
Catholic Church, Monti took the unusual step of personally explaining the
sense and scope of the new rules in a speech to a Parliament committee on
Feb. 27.

In his statement, Monti avoided any explicit reference to the church, and
stressed that the government "holds in high esteem the not-for-profit
sector's contribution to society."

Monti, a trained economist, said the new norms would clarify which
commercial properties qualify as not-for-profit, in order to avoid possible
sanctions from the European Union.

Not everyone, however, was convinced by the prime minister's reassurances.
The Salesians, a large religious order, said they would be forced to close
many of the thousands of private schools they operate throughout Italy if
forced to pay property tax on them. Other church-affiliated bodies voiced
similar concerns.

Yet, despite the consternation the new law provoked, it might not change
things dramatically.

According to a government-mandated study, the current tax exemption costs
the government about 100 million euros ($131.9 million) in lost revenue, a
tiny amount compared to Italy's public debt of 1.9 trillion euros ($2.5
trillion).

Mario Staderini, secretary of the Italian Radicals party, which is highly
critical of the church, said that, despite the promises, the new norm won't
deliver much: "Its effects will be small."

For him, property tax exemptions are just the start of the conversation.
"Italy's whole system of public funding for the church, which amounts to 1
billion euros per year, must be overhauled," he said.

For the church, too, the main result of the government's initiative may be
little more than a clarification of today's somewhat obscure norms. Since
it was first passed in 1992, the law has been modified many times by bylaws
and government regulations, further muddling up the picture.

That has led to a steep rise in the number of court cases in recent years,
said Patrizia Clementi, a tax expert with the Milan diocese who also
consults for the Italian bishops conference on the issue.

A clearer law might also lead to a decline in tax evasion: In the city of
Rome alone, greater scrutiny of church-owned properties has brought nearly
11 million euros ($14.5 million) in extra tax revenues since 2005.

"Right now there are gray areas," she said. "We hope the new norms will
clarify the situation."