September 15, 2012

Catholic Church tapped for taxes

Cash-strapped officials in Europe target one of the last untouched sources of wealth.

The Washington Post

(Continued from page 1)

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This cathedral in Santiago de Compostela is among the Catholic Church’s holdings in Spain. One of Spain’s largest landowners, the church could owe up to $3.9 million in taxes a year – but it’s also facing its own financial troubles.

2010 File Photo/The Associated Press

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The net worth of the Vatican and the Catholic Church’s dioceses is believed to be astronomical. The Vatican’s gold alone is thought to be worth several billion dollars.

2005 File Photo/The Associated Press

Mismanagement has been another problem, especially for the Vatican, which this year reported its worst deficit -- $19 million -- in a decade. The Vatican bank has been embroiled in scandal for the past two decades, from the recent ousting of its president to accusations of money-laundering, ties to the Mafia, a possible murder and the disappearance of $1 billion.

The issue of church tax payments has been simmering for several years. In 2010, European Union regulators launched an investigation into the Catholic Church and the taxes it pays in various countries.

EU competition czar Joaqin Almunia has said the tax breaks could be considered state aid and illegally distort competition in the market. But the issue wasn't at the forefront of the debate until earlier this year when Monti, the Italian prime minister, called for assessing higher taxes on church properties.

Spain's prime minister, Mariano Rajoy, has come down on the other side of the debate. He has called proposals to impose property taxes "irresponsible." The church, he said, deserves the exemptions because it serves a "very important social function."

Meanwhile, at least 100 cities in Spain have passed resolutions supporting municipal taxes on the church, and several thousand more cities are debating them, according to Europa Laica, a pro-secularism group.

In the city of Buenavista del Norte in the Canary Islands, Mayor Antonio Gonzales Fuertes, 30, says he's trying to collect 6,000 euros (about $7,750) from the church for a rental villa and a banana farm it operates.

Fuertes would like to use the money for efforts that have had to be cut, such as children's recreation programs. "The city's financial situation is very bad," he said. "It doesn't make sense to allow for-profit properties to have special treatment while social services are suffering."

For David Cerdan, 38, a council member in the textile town of Aspe in eastern Spain, tax collection efforts are more a matter of principle -- an attempt to distinguish between the church's religious role and its role as a moneymaker.

In June, Aspe's council passed a measure supporting the collection of property taxes on church-owned buildings and land with no religious or charitable function, such as a restaurant in the center of town.

"This is a moment for the country to stand up to the power of the church," Cerdan said.

On the other side of the debate is Vicente Amad, a council member in the shoe-making town of Elda, which in August passed a resolution supporting a church tax. Amad abstained from voting on the measure.

He said he doesn't think this is the right moment for such a step. "It is in times of economic hardship that we need the church the most and need to support it," he said.

Famous for being the birthplace of Miguel de Cervantes and Catherine of Aragon, Alcala, about 22 miles northeast of Madrid, is one of the first Catholic Church districts in Spain. The local government has long had close ties to the church -- the local bishop lives in a majestic 13th-century palace in the city's center -- but in recent months, relations have become strained.

The city is facing a budget shortfall of 33 million euros (nearly $43 million) that has forced cutbacks in everything from security patrols to the number of street lights that can be illuminated at night. In May, the city council backed a proposal to collect municipal taxes from properties within its jurisdiction. The city of 203,000 is tallying which church properties would be affected and drawing up an estimated tax bill.

One big challenge is determining which properties should be considered commercial, as many operate in a gray area. For example, Rubio asked, should a sweet shop that sells almond nougat and is run by nuns be considered a business?

Rubio, who considers himself Catholic, said he doesn't see the proposal as a religious issue and believes all entities that enjoy special privileges -- including political parties and unions -- should be taxed.

But efforts to collect the money have been blocked, and the debate has divided small Spanish towns.

In Alcala and Aspe, the city councils were told by attorneys that three national laws allow the Catholic Church to operate in the country without paying property taxes and that they would have to appeal to the national government to change those laws before handing the local diocese a bill. In Buenavista del Norte, the tax collector refused to send the bill despite an order by the city council.

Fuertes said that he is preparing to take the issue as far as the supreme court until the taxes are paid. "We need to force the church to answer why it should continue to have these benefits while the rest of us suffer," he said.


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