Friday, August 31, 2007

More On Church's Tax Breaks In Italy and EU Competition Law

Yesterday London's Times Online published additional details on the demand by the European Commission that Italy justify the tax benefits it gives to the Catholic Church. (See prior posting.) The EU's Competition Commissioner has received complaints that the arrangements amount to illegal state aid to EU businesses. The problem stems from a decision in 2005 by then-Prime Minister Silvio Berlusconi to extend the Church's property tax exemptions to buildings the Church uses for businesses such as hostels and health clinics. Last year the Italian government backtracked somewhat by limiting the tax exemptions to activities that "are not exclusively commercial", but that still allows exemptions where the religious activity on a property in minimal. The EU request has led to political charges of "anticlericalism" from the Right, and to charges from the Left that the Italian government has given the Church a "privileged position".