February 21, 2012

Italy to Tax Vatican Properties

To soften bite on economic woes in Italy, Vatican's commercial properties could raise a billion dollars a year

Vatican City in Rome. Vatican City in Rome.

The Vatican could lose its tax-exempt status for commercial properties and those that have a partly commercial purpose—and be subject to a massive tax bill approaching a billion dollars a year.

According to a BBC report, Prime Minister Mario Monti has announced that the Vatican must pay taxes on nonreligious property. Previously such properties had been granted an exemption, but in the wake of the latest package of austerity measures being imposed in Italy, more than 130,000 people used their social networking skills via an online petition to demand that the Catholic Church's tax exemption be revoked.

The Church in Italy owns 110,000 properties, valued at a total of nearly $11.9 billion. The tax on those properties could amount to as much as $945 million annually—on everything from shopping centers to hostels attached to chapels to numerous residential properties.

In December, as it struggled to overcome its fiscal woes, Italy re-imposed a tax that must be paid by anyone who owns land or property in Italy. While the Church had previously been exempt from that tax, as ordinary citizens are tightening their belts, they are becoming more critical of special privileges and voicing their opinions. Church-run groups and organizations had enjoyed an exemption from classification as commercial bodies since 2005, which resulted in exemptions from property tax.

Now, however, all that is changing. The newspaper Corriere della Sera was cited as the source of the report that henceforth, tax authorities will be calculating how much of a property is used purely for religious purposes and how much for secular, and impose the tax proportionately. A church, therefore, would retain its exemption, but a chapel that also operated a hostel would be taxed on the hostel.

The news comes after economic data revealed that Italy has officially entered a recession after two consecutive quarters of negative growth.

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