Italy to End Tax Breaks on Church Enterprises, Monti Says

Italy - Prime Minister Mario Monti plans an amendment to an Italian law that will force the Catholic Church to pay taxes on all its commercial properties, according to a statement posted late yesterday on the government’s website.

The church currently pays property tax only on buildings designated as “purely commercial,” based on an Italian law originating 20 years ago and extended in 2006. The wording is ambiguous when it comes to clinics that have a chapel or monasteries that offer bed and breakfast accommodation.

The Catholic Church owns about 100,000 properties in Italy, a third of which are commercial, according to the Italian Radical Party, which historically has challenged the church.

Italy would gain an additional 100 million euros ($130 million) from increasing levies on the church to include all its commercial property, Paolo Berdini, an urban planner and consultant for local administrations, said in an interview last month.

The Vatican reported a profit of 9.8 million euros ($12.7 million) in 2010 after three years of losses during the recession.

EU Probe

Following a complaint by the Radical Party, European Union regulators opened a probe in 2010 into Italian tax breaks on real estate granted to the Catholic Church, saying they may distort competition.

The outcome of the investigation will be made public by next month and if the decision goes against Italy, the EU could order the country to pay a fine and to demand that the church reimburse the government for unpaid taxes of the last five years, the secretary of the Radical Party, Mario Staderini, said in an interview in Rome on Dec. 21.

Monti has informed European Union Competition Commissioner Joaquin Almunia of his decision to overhaul the rule and hopes “the government’s initiative will allow the European Commission to close the procedure,” according to the statement.

Monti served as the EU’s competition commissioner from 1999 to 2004.