A profitable way to give up being the state church

 Ostensibly “Vatican II” was the reason for revising the concordat with Mussolini. The updated concordat invokes the “Declaration on Religious Freedom” which issued by the Second Vatican Council in 1965. However, nothing there quarrels with Church privileges. All it requires is that adherents of the other religions be allowed to worship freely.

If [...] special civil recognition is given to one religious community in the constitutional order of society, it is at the same time imperative that the right of all citizens and religious communities to religious freedom should be recognised and made effective in practice. [1]

As Fr. Brian W. Harrison, O.S., a professor in the Pontifical Catholic University of Puerto Rico, points out, this doesn't mean that other religious communities should have equal rights

in regard to public education, marriage legislation, chaplaincy to state institutions, civil religious ceremonies, the designation of public holidays (Our Lady's feast days, for instance), clerical immunity from civil prosecution, and other important aspects of civic life which reflect Catholicism's uniquely-recognized status. [2]

Thus the 1984 revisions of the Italian concordat appear to have been motivated less by any sudden inspiration from a document that was almost twenty years old than by the threat of losing the entirety of the favourable concordat with Mussolini which had come to be widely seen as “outdated”. [3] Furthermore, if this revision was indeed meant to spread religious freedom to others the subsequent behaviour of the Italian Church is hard to understand. Although the 1984 concordat states that the Catholic religion is no longer the sole religion of Italy, in 2007 the Church objected to the introduction of an omnibus religious freedom law which would “put the Catholic Church on the same level as religious sects” [4] and two years later it had still not been passed. [5]

Instead, the revision to the Lateran concordat seemed intended to head off any possible move to abolish the concordat by extending some of its privileges one by one to some of the other denominations. This was begun already in 1984, through a church-state agreement with the Waldensians (the oldest Protestant group in Italy) called an intesa and now at least a dozen different denominations have intese, with negotiations for more of them underway. [6] These intese are anchored in Article 8 of the 1947 Italian Constitution, but the political climate long delayed their implementation . [7]

An intesa grants clergy automatic access to state hospitals, prisons, and military barracks; allows for civil registry of religious marriages; facilitates special religious practices regarding funerals; and exempts students from school attendance on religious holidays. If a religious community so requests, an intesa may provide for state routing of funds, through a voluntary check-off on taxpayer returns, to that community. [8]

By the 1980's it was clear that Italy would no longer accept the 1929 concordat made with Mussolini. The Italians had voted in referenda to legalise divorce (1974) and abortion (1981). There was no chance of maintaining the Catholic Church as the official state religion, with its priests' salaries paid by the government.

[T]he Catholic Church feared, because of increasing secularisation, that attempts could be made by some political groups to pass legislation severing government funding for the Catholic Church and/or adopting legislation — similar to the German system — which would have created a system in which taxpayers could opt out of paying tax dollars to support the church. [9]

This 1984 concordat kept the Church receiving state finds (Article 7.6) until a “voluntary” system could be devised which, by default, would still give the lion's share to the Church. This is how it works.

All eligible churches compete with one another, and with a state fund “Beni Culturali” which supports museums and historical buildings), for 0.8% (otto per mille) of each taxpayer's taxes. Italian taxpayers may not refuse to pay this tax but non-religious persons may designate the State fund. If a taxpayer fails to make a designation, then .8 percent of his or her taxes are allocated on a pro rata basis based on the national average to eligible church bodies which have agreed to participate. [10]

This clever arrangement was thought out by Bishop Attilio Nicora. The end effect putting it on a pro rata basis is that, although only 40 % of Italian taxpayers actually designate the Catholic Church as the recipient of their “church tax”, payments from almost 90% of them wind up in the Church coffers. [11] (And that's only what happens officially: for a look at what actually goes on, see “Church-tax scandal: Are secular Italians paying for Berlusconi's sins?”)

After a decent interval, Bishop Nicora was rewarded for his ingenuity with a cardinal's hat and became the Vatican's chief financial officer. As head of the Administration of the Patrimony of the Apostolic See (APSA) he manages the property of the Holy See (including numerous hotels) — and he also administers the huge state subsidies resulting from his own “church tax” negotiations. 

The Italian politicians of the time didn't understand the nature of this revised concordat: they viewed it in ceremonial, not legal terms. The (Socialist!) prime minister considered it an historic honour to sign the concordat, and the parliamentarians (even the Communists) considered it an act of courtesy to the Church to ratify it. (Only the Liberals, with their attachment to strict church-state separation, were willing to oppose it.)  It wasn't until afterwards that they began to notice what they had relinquished to the Church. [12]

And so have others. In June 2007 it was reported that the European Union's competition commissioner, Neelie Kroes, had opened an inquiry into the tax treatment of the church in Italy. The question was whether the tax concessions granted by the concordat amounted to illegal state aid to Church enterprises. Then in August a junior Italian finance minister, Paolo Cento, said the issue needed to be tackled in next year's budget. A few days later a senior Vatican official offered to renegotiate the concordat. [13] However, since then nothing more has been heard of either an EU investigation — or of any willingness to renegotiate the concordat. 

The tax breaks stem from the 1929 Lateran Treaty which the Vatican used to negotiate exemptions on income from property on behalf of the Italian Church. 

At the end of 2005 Silvio Berlusconi, then the centre-right Prime Minister, extended the Church’s tax exemptions to include buildings used by the Church for businesses such as hostels or health clinics. Mr Berlusconi’s move was regarded by the Left as a blatant attempt to court the Catholic vote on the eve of the 2006 elections, which he narrowly lost to Romano Prodi and the centre Left.

The Prodi Government amended the tax breaks last year, saying that only Church activities “which are not exclusively commercial” were exempt. However, the word “exclusively” left a loophole allowing properties with even a minor form of religious activity to benefit.

The Church owns 100,000 properties in Italy, 2,000 of them used as hospitals, clinics or rest homes. In Rome alone the Church owns 65 rest homes, 250 schools, 580 institutes, convents and monasteries and 18 hospitals. [14]
 

Notes 

1. Article 6, “Declaration on religious freedom, Dignitatis humanae, on the right of the person and of communities to social and civil freedom in matters religious promulgated by His Holiness Pope Paul VI on December 7, 1965.” http://www.vatican.va/archive/hist_councils/ii_vatican_council/documents/vat-ii_decl_19651207_dignitatis-humanae_en.html

2. Brian W. Harrison. “The Center is holding”, a review of Michael Davies', The Second Vatican Council and Religious Liberty in Living Tradition: Organ of the Roman Theological Forum, (Oblates of Wisdom), Number 44, January 1993. http://www.rtforum.org/lt/lt44.html

3. Mauro Giovannelli, "The 1984 Covenant between the Republic of Italy and the Vatican: A Retrospective Analysis after Fifteen Years", Journal of Church and State, Vol. 42, 2000, p. 529. http://www.questia.com/googleScholar.qst;jsessionid=Mn9G7Nmv8hvJ3tjQmrPK2FZ5QvlLyY7Q9Zvnxh1JbpJWdKwPXTRb!-1082217001!547733517?docId=76960041

4. "Italian bishops concerned by terms of religious freedom law", Catholic World News, 8 July 2007.

5. Freedom House, "Freedom in the World 2009 - Italy", 16 July 2009.  http://www.unhcr.org/refworld/docid/4a6452ac23.html 

6.  International Religious Freedom Report 2000: Italy, [US] Bureau Of Democracy, Human Rights, and Labor. http://atheism.about.com/library/irf/irf00/blirf_italy00.htm

7. Massimo Introvigne, " 'Praise God and Pay the Tax': Italian Religious Economy - An Assessment", A lecture at the Institute of World Religions, Chinese Academy of Social Sciences, Beijing (China), 12 March 2002. http://www.cesnur.org/2002/mi_italianrel.htm

8. International Religious Freedom Report 2009: Italy, [US] Bureau Of Democracy, Human Rights, and Labor, 26 October 2009. http://www.state.gov/g/drl/rls/irf/2009/127317.htm

9. James T. Richardson, Regulating Religion: Case Studies from Around the Globe, (Springer, 2004), Google reprint, pp. 208. 

10. Ibid.

11. Luisa Brandl, Die blühenden Finanzen des Vatikans, Stern, 6 September 2007. http://www.stern.de/wirtschaft/finanzen-versicherung/597047.html

12. Domenico Del Rio, "L' 'unité des catholiques italiens' ",  Le Monde diplomatique, May 1988.

13. John Hooper, "Church ready to forgo tax breaks", The Guardian, 28 August 2007. http://www.guardian.co.uk/world/2007/aug/28/italy.johnhooper

14. Richard Owen, "Vatican faces EU inquisition on tax", The Times, 31 August 2007. http://www.timesonline.co.uk/tol/news/world/europe/article2357980.ece