Alcala de Henares, Spain — Cash-strapped officials in Europe are looking for a way to ease their financial burden by upending centuries of tradition and seeking to tap one of the last untouched sources of wealth: the Catholic Church.
Thousands of public officials who have seen the financial crisis hit their budgets are chipping away at the various tax breaks and privileges the church has enjoyed for centuries.
But the church is facing its own money troubles. Offerings from parishioners have nosedived, and it has been accused of using shady bank accounts and hiding suspect transactions.
Now, along come officials like Ricardo Rubio.
Rubio, a city council member in Alcala, is leading an effort to impose a tax on all church property used for non-religious purposes. The financial impact on the Catholic Church could be devastating. As one of the largest landowners in Spain — with holdings that include schools, homes, parks, sports fields and restaurants — the church could owe up to 3 billion euros in taxes each year.
“We want to make a statement that the costs of the crisis should be borne equally by every person and institution,” said Rubio, a 36-year-old former accountant in his first term in office.
Similar efforts that target church coffers or powers are underway in neighboring countries. In Italy, Prime Minister Mario Monti has called for a tax on church properties or on those portions of properties that have a commercial purpose. In Ireland, the minister of education is fighting to end church control of many of the country’s primary schools, and the government has slashed in half the grants it gives poor families for first Communions. More than half the city councils in Britain have eliminated state subsidies for transportation to faith-based schools, leading to a precipitous drop in enrollment.
Once an untouchable institution in some parts of Europe, the Catholic Church has come under fire for its government subsidies at a time when the continent’s economies are faltering and the population is subject to painful cuts in jobs, benefits and pensions.
Political groups have seized on the crisis as an opportunity to open up a larger debate about whether it is time to unwind some of the deals struck generations ago between church and state in predominantly Catholic countries in Europe.
“The separation of church and state is the big issue here,” said Charles Zech, director of the Center for the Study of Church Management at Villanova University, which focuses on the Catholic Church’s finances.
In response to the controversy, the Vatican and representatives of the church — Cardinal Antonio Maria Rouco in Spain and Cardinal Angelo Bagnasco in Italy, who head the council of bishops in their respective countries — have released statements saying they intend to comply with all laws. But they have declined to comment further except to emphasize that current norms recognize the “social value” of church activities.
Efforts to pare down its financial privileges could not have come at a worse time for the Catholic Church, which is experiencing money troubles despite its great wealth.
The net worth of the Vatican and the Catholic Church dioceses is difficult to estimate, but it is thought to be astronomical, according to Zech. The Vatican’s treasure of gold alone is thought to be worth several billion dollars. The church’s nearly 3,000 dioceses serve individual countries, regions or cities that defer to the Vatican in matters of doctrine but maintain their own finances.
With most of its assets tied up in buildings and artwork, the church has faced a cash-flow problem in recent years. Contributions have fallen dramatically in the wake of the global economic downturn. The clergy abuse scandal cost the church hundreds of millions in settlement costs, further eroding cash reserves.
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 two decades, from the recent ousting of its president to accusations of money laundering and ties to the mafia, a possible murder and the disappearance of $1 billion in a bank it was closely linked to.
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. The E.U.’s competition czar, Joaquin 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 taxes on church properties.