EU Executive May Probe Catholic Church's Tax Breaks

BRUSSELS - The European Commission has asked Italy for information about tax breaks it gives to the Roman Catholic Church on income from property, after receiving complaints that they amount to illegal state aid.

"We have addressed the Italian authorities and asked them for information about this. We are talking about certain tax concessions for the Catholic Church in Italy," Commission spokesman Jonathan Todd told a news briefing on Tuesday.

"We have not decided yet if an investigation will be opened. We need further information ... It would be a state aid investigation."

If the Commission opened an official probe and found the Church received aid illegally, it would be up to the Italian authorities to recover the money, Todd said.

Britain's Guardian newspaper reported on Tuesday that the Vatican had signalled its willingness to give up some tax breaks from the Italian state due to pressure from Brussels and Prime Minister Romano Prodi's centre-left government.

The Church gets a handout of almost 1 billion euros ($1.37 billion) from income tax receipts and exemption from the payment of local taxes on most of its property, the newspaper said.

The church's business activities include schools, hospitals, clinics and hotels and it pays only half the normal corporation tax, the newspaper added.

Italy's government is looking at ways to increase the flow of funds into state coffers.

Brussels has clashed with the Roman Catholic Church in the past. In 2005 the Commission said Spain was breaking EU law by exempting the Church from value added tax on goods such as candles, pews and land for building churches.