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EU May Question Vatican's Generous Tax Concessions

by Ulrika Lomas, Tax-News.com, Brussels

28 August 2007


The European Union has hinted that it may open a formal investigation into a series of generous tax concessions granted to the Roman Catholic church by the Italian government.

According to an AFX News report, a spokesman for EU competition commissioner Neelie Kroes said that while Brussels has not yet launched an investigation into the tax breaks, it has already requested information from the Italian government.

"We are talking about certain tax concessions for the Italian Church in Italy. We haven't yet decided whether or not an investigation will be opened. We need to have further information," the spokesman revealed.

The UK's Guardian newspaper has reported that not only does the Catholic church in Italy receive money from the government from income tax receipts, it is also exempt from paying tax on most of its property holdings, and pays only half the normal rate of corporate tax on its business activities, such as schools, hospitals and hotels. It is estimated that these tax breaks cost the Italian government EUR1.3 billion (US$1.77 billion) annually.

In an interview published on Monday by the La Stampa newspaper, Monsignor Karel Kasteel, a senior Vatican official, signalled that the church is ready to "sit down at a table with the government" and revisit the tax issue. The current agreement between state and church in Italy is based on the 1984 Concordat, and the official reportedly revealed that the church is willing to revise this.

Monsignor Kasteel's comments were made a week after Paolo Cento, a junior minister in the Italian Finance Ministry, said that the government would tackle the church's tax breaks in the next budget.

TAGS: Italy

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