Amid Economic Crisis, Spain Ponders Taxing Catholic Church Property

A concordat with the Vatican has exempted the church from taxation but towns and cities are looking for loopholes to get at funding during austere times

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Manu Fernandez / AP

Antoni Gaudi's Sagrada Familia church, stands unfinished in Barcelona, Jan. 13, 2010.

Although they have rented it out to a restaurant for the past five years, the owners of one building in Aspe have never paid property tax. Nor have they ever paid tax on the apartments that house two of their employees. But that may be about to change. Last week, the city’s government voted to partially rescind the exemption that the Catholic Church, landlord of those three properties and another eight more in town, has long enjoyed. And thanks to the crisis that threatens to upend Spain‘s economy, it’s not the only place demanding change.

Three different laws, including a 1979 agreement with the Vatican, exempt the Catholic Church from paying property tax in Spain. The same provision holds for other recognized religions and non-profit organizations like the Red Cross, yet because Catholicism is the dominant religion in Spain, and because the Church’s holdings there are so vast (España Laica, a pro-secularism group, estimates that were it not for the exemption, the church would annually owe 2.5 to 3 billion euros in property taxes), critics have long argued that the arrangement is part of the preferential treatment granted the Catholic Church. It’s only now, however, with austerity measures bearing down and a European bailout looming, that anyone has thought to put that criticism into action. Economic pressure, in other words, may well accomplish what 33 years of democracy have not.

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“With the crisis, we all have to tighten our belts,” says David Cerdán, the Socialist Party councilman in Aspe who, together with a colleague from the United Left party, presented the motion to abolish the exemption. “Our sense of social justice, which I believe Catholicism shares, tells us that those who have the most should help those who have the least.”

In Aspe, a town of roughly 20,000 inhabitants located in the southeastern province of Alicante, the measure applies only to those holdings that are not strictly devoted to religious practice or to social services. Of the 11 properties that the church owns, only three — a storefront that houses a restaurant and the two parish priests’ homes — would be subject to the tax, which Cerdán estimates would annually bring an additional 7,000 euros into the municipal coffers. “This doesn’t have to do with God,” Cerdán says, rejecting claims that anti-clericalism is motivating the change. “This has to do with problems on earth.”

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At least some of that money cannot be collected unless national laws change. Clergy housing — including the grand palaces in which many bishops live — along with sanctuaries, seminaries, and monasteries and convents are explicitly protected by the Vatican concordat and other legislation. “The constitution declares the country ‘non-denominational,'” says Alejandro Torres, professor of ecclesiastic law at the Public University of Navarra. “But out of historical precedent, our lawmakers have preserved some of the church’s privileges.”

Many Catholic schools and hospitals, for example, are subsidized by the State and each year, citizens have the option to dedicate 0.7% of their income tax to the Catholic Church (they may also choose that the same amount go to unspecified “social services” or be divided between both). In 2010, the church earned 248 million euros from income tax returns.

But hard times have a way of changing even the most entrenched practices. In May, the opposition Socialist Party pledged to change the legislation that guarantees the church’s property tax privileges and asked its officers in municipal governments throughout the country to introduce motions that would take advantage of loopholes in the existing laws. Like Aspe, Alcalá de Henares, a city of 204,000 about an hour north of Madrid, and tiny Amoeiro, in northwestern Galicia, have decided to bill taxes on properties that aren’t explicitly mentioned in the Concordat, such as those that the church rents out or that aren’t being used at all. In Amoeiro’s case, the municipal government has even put a date on when the tax must be paid: July 20. Others, like the city of Zamora in central Spain, will begin billing for trash collection — a charge the church has avoided until now.

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Church representatives, including Cardinal Antonio María Rouco, head of Spain’s Council of Bishops, have stated publicly that they will comply with their legal obligations. But Rouco also suggested that a change in the tax regimen “would have a detrimental effect on other possible actions, like Caritas,” the Church’s charitable organization. The governing Popular Party (PP), which opposes a change, agrees with him. “The Catholic church fulfills a very important social function in Spain,” says Manuel Cobo, the PP’s secretary general for local policy. “Especially in extreme situations like this crisis, religious organizations offer critical assistance to our most underprivileged citizens.”

Cobo doesn’t believe that the Socialist Party’s campaign to overturn the exemption is truly motivated by economic concerns. “The Socialists were in power for the last eight years. Why didn’t they do away with the exemption then?” he asks. “They’re only doing it now because they think it will win them votes. It’s an electoral strategy.”

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If so, it may not be a bad one. A poll conducted by Metroscopia and released earlier this week shows that 80% of Spaniards surveyed — including 61% of PP voters — believed the Church should pay property tax. And some of those towns that are currently taking action, like Zamora, are governed by the PP. “The crisis has helped us all remember that we are a non-denominational nation,” says law professor Torres, “Without a state religion.”