For Israel And Vatican, A Taxing Issue

For Israel And Vatican, A Taxing Issue

by Michele Chabin, Israel Correspondent
The Jewish Week, 13 May 2009
[removed from the site of The Jewish Week]

[...] But what the visit did not achieve is a long-awaited agreement between Israel and the Holy See, the diplomatic voice of the Catholic Church, on taxation and jurisdictional matters related to church property, issues that have seriously stained relations between the two countries for many years.

Israel agreed to resolve the issue expeditiously in 1993 and since then Catholic leaders have privately expressed frustration that no action has been taken.

The need to resolve these matters became more urgent just prior to the papal visit, after the Israeli media reported — incorrectly — that the Vatican is seeking sovereignty over six holy sites, some of them in predominantly Arab areas.

Someone launched a petition calling for Jews “to save Israeli property,” a cause some right-wing Knesset members have begun to champion. Knesset members aligned with the haredi Shas Party boycotted a reception for the pope over this issue. 

Israeli and Vatican officials say the public controversy has complicated an already complex situation in a region where Jews, Muslims and Christians often lay claim to the same site, and where simply opening a tunnel or laying a pipe can spark days of violence.

“There is a lot of misinformation and I’d like to explain the principles,” Yigal Palmor, spokesman for the Foreign Ministry, told The Jewish Week at the City Hall press center set up for the pope’s visit.
According to Palmor, there are three issues in play.

“The first relates to a tax exemption for church institutions, such as churches, monasteries, schools, abbeys. The second, which is unrelated to the first, relates to immunity from expropriation. In other words, the church wants a guarantee that its property cannot be taken to build a road, for example.”

The third issue relates to the Room of the Last Supper, which Catholics call the Cenacle.

“The Catholic Church has requested private ownership of the church,” a potentially inflammatory move considering that Muslims consider the site holy and many Jews believe King David is buried in a tomb beneath the Cenacle.

Unlike the first two matters, “the Cenacle is not under negotiation,” Palmor emphasized. “The Israeli government has not accepted the church’s request and it remains the property of the Israeli government.”

Whether or how much to tax property owned by the Catholic Church is the thornier of the two outstanding matters because it means a loss of tax revenues (millions of shekels) and second, because it could set a precedent for other denominations and religions, according to an official who requested anonymity.

“The question is, what is a religious institution?” the official asked. “Is it just a church or also a monastery or a hospital? Is it just a synagogue or also [an independent] mikveh or yeshiva? Is it a church library, a church-run women’s club? What about the other Christian denominations, the Muslims, the Druze and Bahai? There is no end to it. In the ‘Holy Land,’ everything is someone’s religious institution.”

The taxation matter for holy places became Israel’s headache in 1948, right after it declared statehood.

The United Nations insisted that Israel sign a declaration stating, “No form of taxation shall be levied in respect of any Holy Place, religious building or site which was exempt from such taxation on 14 May 1948.”

To the best of anyone’s knowledge, Israel never signed the document. Even so, it exempted the various churches from paying taxes for decades “out of magnanimity,” said Rabbi Rosen, director of the American Jewish Committee’s Department for Interreligious Affairs.

Tax exemptions for all places came to an end with the 2002 Budget Law, which stripped away many but not all exemptions previously enjoyed by religious institutions. Today, such institutions pay one-third to one-half of the property taxes non-exempt owners would need to pay for the same property.

“People in the Finance Ministry felt that the Foreign Ministry had been rather rash when agreeing to this [negotiations over taxation as opposed to just taxing them],” he said. “To give any blanket agreement to one Christian denomination and not to other denominations, or to Muslims or Jews in the Jewish state would be difficult to justify,” Rabbi Rosen said the Finance Ministry felt.

Speaking by phone from the Vatican, Father David Jaeger, a legal expert, noted that “in the United States churches, synagogues and other religious institutions are exempt from paying local property taxes. In Israel we are not looking for anything more or less than what is granted in the United States.”

The Palestinian Authority grants a full tax exemption to religious institutions, Jaeger noted.
“Keep in mind,” Jaeger continued, “that there was the same tax exemption in Israel until 2002. The 2002 bill overturned two successive decisions by the Supreme Court.

Jaeger called the issue “a very serious matter. Typically religious houses cover a substantial area, sometimes in very desirable locations where city taxes are very high. If such institutions were forced to pay arnona — Jaeger, an Israeli-born convert used the Hebrew term for property tax — many might be forced to close. Even paying a third or a half is too much,” Jaeger insisted.

Jaeger said that Catholic institutions in the Holy Land have a unique status.

“The Catholic Church in Israel lives almost entirely on the good-will offerings of Catholics elsewhere, and especially in the States. Our donors in the United States will not understand why the church cannot have the same protection in Israel that churches and synagogues have in the United States.

Furthermore, we’re not asking for anything new. Where is the precedent? Do you think Jerusalem or Israel would be better off without the church’s presence?”

Government officials say it is unfair to compare Israel with the United States or any other nation.
“Israel is not the heir of the Ottoman empire, even though under Israeli law some Ottomon law is preserved,” Parmor said. “Nor are we bound by every promise or pact signed by the Sultan.”

Whatever the outcome of the negotiations over church property and taxation, said Rabbi Rosen, Israelis must remember one thing: “The Vatican is not just another church; it is a state and must be dealt with accordingly.”