Italy to raise €600m by taxing Church businesses

The Italian government announced measures yesterday to end tax exemptions on commercial property owned by the Catholic Church, in a move expected to add up to €600 million to state coffers each year.

Prime minister Mario Monti, who is a practicing Catholic, tacked the measure — which affects other non-profit organisations — onto a larger deregulation package.

The European Commission opened a probe against Italy in 2010 to determine if tax breaks for some Church properties amounted to illegal state aid and distorted competition.

Some political parties, particularly the tiny, liberal Radical Party and some intellectual leaders, have led a campaign to strip the Church of tax exemption on properties not used exclusively as places of worship.

The Church owns many private clinics, hotels and guest houses that enjoy tax exempt status because they are also occupied by priests or nuns, or have a chapel. The law closes this loophole, which granted tax exemptions to predominantly commercial structures.

The Italian Catholic Church — separate from the Vatican state, which has sovereignty — owns about 100,000 properties worth €9bn, including churches, schools, universities and hospitals.

It also owns properties mainly aimed at tourists such as the French restaurant Eau Vive and the four-star hotel Ponte Sisto in Rome.

Mr Monti asked Italians in December to make tough sacrifices as part of an austerity plan to stem contagion from the eurozone debt crisis.

In a 48-hour period after the austerity package was passed, more than 130,000 people signed an online petition demanding that the Church be stripped of much of its tax exempt status.

The new law will have a “positive effect on revenue”, the government said. The income it makes from the measure will go towards cutting taxes, not reducing Italy’s massive debt, it said.

When the plans were announced, the Corriere della Sera newspaper said it would mean the government tax assessments would be based on how much of a property was used for religious purposes. This would leave individual church buildings exempt, but see some taxes levied on a chapel which ran a hostel, for instance.

According to Italy’s association of city governments, the new taxes will bring in up to €600m per year.

The package will voted on in the Senate next week and must then go before the lower house of parliament.