Church ready to forgo tax breaks

Rome, Italy - Under pressure from the European commission and Romano Prodi's centre-left government, the Roman Catholic church has signalled its willingness to give up some of the tax breaks it gets from the Italian state.

The church gets a handout of almost €1bn (£678m) from income tax receipts and exemption from the payment of local authority taxes on most of its property. In addition, the church's business activities, including schools, hospitals, clinics and hotels, pay only half the normal corporation tax. Most estimates have put the cost to the Italian treasury at about €1.3bn a year. In Rome alone, according to La Stampa newspaper, the church owns 18 hospitals, 55 clinics and 250 schools.

The latest version of the church-state agreement in Italy, known as the Concordat, dates from 1984.

In an interview published yesterday by La Stampa, a senior Vatican official, Monsignor Karel Kasteel, said: "The Holy See is ready to sit down at a table with the government to update the Concordat and revisit the tax issue."

His remarks were in sharp contrast to the usual reaction of Catholic prelates in Italy, who have traditionally denied the church benefits from any sort of privilege.

Mr Kasteel was speaking less than a week after a junior finance minister, Paolo Cento, said the issue needed to be tackled in next year's budget.

In June, it was reported that the EU's competition commissioner, Neelie Kroes, had opened an inquiry into the tax treatment of the church in Italy.