Vatican May Owe €8 Billion in Back Taxes

by Bevan Sabo From The Independent:

Eight billion euros worth of tax breaks pocketed by the Catholic Church in Italy could be in breach of European law and may have to be repaid, it has emerged.

The European Commission has said that tax relief on 100,000 Italian properties enjoyed by the Holy See since 2005 was under the spotlight, after announcing an “in-depth” investigation.

A spokesperson for Competition Commissioner Joaquin Almunia said the EC suspected the exemption amounted to state aid that was at odds with European Union law.

“These exemptions may distort competition,” he said. “Thus far, Italian authorities have not provided sufficient evidence to enable the Commission to conclude that the contested measures are justified by the principles of the Italian tax system”.

The crux is whether the EC decides Church-run businesses should really be considered as commercial enterprises and therefore liable to taxation.

If Italy is found to have violated EU subsidy laws, it will have to cancel the exemption and seek reimbursement from the church. If that happened, the financial consequences for the Catholic Church would be grave.

Estimates value the Vatican’s property tax breaks at €2bn (£1.75bn) a year. No one from the Vatican was available to comment on the EC probe. However, a statement by the Italian foreign ministry said: “The Italian government is convinced that it can demonstrate to the EC in a clear and definitive manner the good reasons that justify the current regulations, which do not violate EU rules on state help in favour of the church.”

The church currently avoids paying tax on about 100,000 non-commercial properties including 8,779 schools, 26,300 ecclesiastical structures and 4,714 hospitals and clinics.

Though the intricacies of EU politics are not my forte, three problems jump out immediately. First, such specific tax breaks like these will always create this type of problem. Whenever legislators step in to exempt one particular industry or sector from taxation, this violates the objectivity of the law and necessarily creates problems such as the one described in the article. Second, no national government should be answerable to any higher power other than the people it governs. A nation’s citizens are the stakeholders of their government, it is abominable for that government to be accountable to anyone or anything other than its citizens.

The third, and possibly biggest, problem lies in the nature of the Vatican itself. What clearer and more absolute violation of the wall between church and state exists? And that wall is not simply a matter of tradition or conceptual idealism. Religion is subjective, law and government must be objective. Subjective law will always result in the violation of individual rights. So any erosion of the wall between church and state will lead to wrongdoing.