EU Homes in on Catholic Tax Breaks, ANSA, August 28, 2007

EU Homes in on Catholic Tax Breaks
Antitrust Sees Possible Breach of Ban on State Aid

ANSA
August 28, 2007

http://www.ansa.it/site/notizie/awnplus/english/news/2007-08-28_128103368.html

(ANSA) - Brussels, August 28 - The tax breaks enjoyed by the Catholic Church in Italy are coming under the magnifying glass of the European Commission which thinks they may breach EU rules banning state aid to business.

A spokesman for Competition Commissioner Neelie Kroes said on Tuesday that Brussels will soon ask Rome for "further information" about "certain fiscal advantages" from which the church in Italy benefits.

The Commission is reportedly interested in a law passed by the Silvio Berlusconi government in 2006 which effectively exempted all church property used for commercial purposes from local real estate tax.

Officials at the Competition Commission are also believed to be interested in the 50% reduction in corporation taxes applied to church business activities such as schools, hospitals, clinics and hotels.

"We haven't yet decided whether to open an enquiry or not," the spokesman said, adding that the Italian state had already answered a first request for information.

If the Commission decides to launch a full enquiry, it will be the first time that the European Antitrust body has focused its sights on the Catholic Church.

The Commission spokesman noted that Italian authorities would be expected to recover any illegal aid that the enquiry judged had been given.

News of a possible EC enquiry came in the wake of a new round of polemics in Italy over the church's tax advantages, which secular groups have long opposed on the grounds that they go against the separation of church and state written into the constitution.

SHARE OF INCOME TAX.

As well as the tax breaks, the Catholic Church also receives a share of the income tax paid by Italians every year. Last year the figure allocated to the Church was 930 million euros.

This payment, together with the special tax conditions enjoyed by the Catholic Church, costs the Italian Treasury 1.3 billion euros a year, according to most estimates.

On Monday a top Vatican official, Monsignor Karol Kasteel, was quoted in the La Stampa daily as saying the church was ready to re-discuss fiscal arrangements with the Italian state.

He later denied having said this. But the polemics continued regardless, with Catholic lawmakers defending the current arrangements and leftwingers in the government calling for a round of talks with Church leaders.

Economy Ministry Undersecretary Paolo Cento said the attention from Brussels "confirms the need to set up bilateral negotiations to find a solution to a problem which can't be put off for much longer".

The Italian bishops' conference made its voice heard through its no.2, Monsignor Giuseppe Betori, who denied that the church had any unfair advantages.

The property tax exemption only applied to church activities that had social, religious or cultural aims, he said, pointing out that other charity and non-profit organisations had similar exemption.

"It would be incongruous for the state to weigh down those initiatives that have the common good as their goal," he said in an interview with Avvenire, the daily owned by Italian bishops.