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Taxation and Registration PDF Print E-mail

Jurgen Warnke
International Academy for Freedom of Religion and Belief
Germany

delivered at the
International Coalition for Religious Freedom Conference on 
"Religious Freedom and the New Millenium"
Berlin, Germany, May 29-31, 1998

In the next 15 minutes, I want to lead you to a more pragmatic area, namely, the financing of churches, money, and taxes. In the wealthy societies of western Europe and the US, I think this surely is one of the areas in which most of the possible discrimination can take place. Let me just relate one example of how taxation comes into the picture.

Some time ago, US missionaries in south Germany applied for a residence permit. This was refused. The office of the Minister of the Interior in Stuttgart (south Germany), said that, if the government issues a residence permit for these missionaries, then the government would be supporting this religion, or subsidizing this church because the missionaries would use the infrastructure of the country, such as public transport, water, electricity etc., which is heavily subsidized by German taxpayers. On the other hand, Munich has an extremely beautiful yellow church near Feldherrnhalle. It is very old and very nice. Most people do not know, however, that the Bavarian government owns this church; it is just rented permanently to the Catholic Church. Therefore, in this area of taxation and financing of churches, we have some very interesting things that happen in Germany.

Within the framework of my contribution to this conference, it is, of course, not my aim to find a political or other justification for the system of financing the churches as it is practiced in Germany. The smaller religious communities in Germany could be seen as disadvantaged in this context. Many of them do not have the legal status of a public law corporation and, consequently, they are not allowed to impose church taxes on their members. For their financing, they have to rely on voluntary payments by their members, which often exceed even the size of the church tax.

I will only give a short overview of the system of financing the churches, as it is practiced in Germany. In Germany, all religious communities that have the status of a public law corporation have the right to levy their own church taxes. This is guaranteed by Article 140 of the German Constitution, which incorporates the detailed church-state provisions of the Weimar Constitution. The church’s right to levy taxes is embodied in Article 137 of this constitution. It provides that those religious communities which are public law corporations, have the right to levy taxes on basis of the income tax, and in respect of the rulings of the federal states.

The actual total tax revenue of the two big churches in Germany, the Roman Catholic and the Protestant churches, amounts to about eight billion German marks for each per year. This amount makes up about eighty percent of these churches’ budget. Although the right of collecting church taxes is the right of all religious communities which are public law corporations, including the smaller ones, the church tax above all benefits the two big churches. Only a few smaller religious groups use their right if they are public law corporations—for example the various Jewish communities.

In Germany, the status of the public law corporation is applied for state by state. We have 16 states, so, if you want to be a public law corporation, you have to apply in 16 different states. For instance, in the state of Hesse, we have about 100 different religious communities, and only 15 of these communities have public law corporation status.

It is important to clarify that the church takes the real tax, in the sense of the German tax system. This means that it is a discharge of money, imposed by public law upon persons. Church taxes are strictly separated from contributions, which can be claimed by every local religious community from its members. The most important part of the collection of the church tax by the state is that the church takes the money by government means. If a member of a tax-collecting church refuses to pay his church tax, then coercive methods of fiscal law will be applied. This means that the state’s methods of execution will be used so the church does not have to sue, or bring legal action for its tax. It is this official state collection of the church tax that makes the German system of church financing unique, and constitutes its difference from other systems.

The church tax is an area of church-state relationship where church and state cooperate very closely. It is the state that determines the preconditions, the specific tax regulations, the means of collection, and the methods of public law that will be used against tax debtors. So, the church tax is regulated by the states, whereas it is the church’s duty to define the material conditions. They decide whether they want to levy church taxes or not, what kind of church tax they want to take, and when the church tax obligation begins and ends. The members of the churches entitled to tax revenue are the debtors of church tax.

Referring to the allocation of the functions I mentioned before, the ecclesiastical law regulates the question of membership. Membership in the Roman Catholic and Protestant churches—and with it the obligation to pay church taxes—begins with baptism. In consequence, this means that a little child, who has, for example, some self-owned property because of inheritance, could already owe church tax. The obligation to pay church taxes ends with the death of the church member, or with resignation of membership.

In contrast to obtaining membership, which is regulated by the churches themselves, the rules for withdrawal of church membership have been laid down in several public statutes of the German counties. This state regulation of resignation from church membership is constitutionally necessary in Germany. This right also includes the freedom to leave a religious community at any time. This connection exists, of course, to make a distinction between the ecclesiastical and the official consequences of church membership resignation.

Within the framework of this article, I will concentrate only on the official aspects, as they are decisive for the church tax obligation. If the official withdrawal of membership, or the public law effects of the membership are ended, the notice of withdrawal has to be declared, not to the church, but to the competent government authority. If a member of a church declares the withdrawal of his membership to his government authority, the authority will inform the church which is affected by it. The former member of the church receives a certificate about this withdrawal. Whereas all other official consequences of church membership end at the moment of withdrawal, the obligation to pay church taxes may last a little bit longer—in some counties, even to the end of the year.

The basis of the collection of church taxes is the yearly church tax resolutions of the tax and title religious communities. In this resolution, the competent ecclesiastic institution first determines the assumed financial need for the next year, then fixes the taxation scale of the church tax. Of course, the church’s internal resolution has no validity for the state’s spheres, for this needs the authorization of an official authority.

It is important to clarify that the state authorization does not contain any right of the state to influence the church’s financial resolutions. The state authorities only have to check if the church internal resolutions are compatible with the general tax laws. When the state authorities agree, the church tax resolutions become binding for all church members when they are entered into the official law book of the state.

Church tax in Germany is no longer calculated based on church internal scales. For reasons of simplification, the official income and employment tax is used as a basis of assessment. The church tax is calculated as a percentage of the income tax. So today, the church tax amounts to eight or nine percent of the individual income tax, depending on the county in which you live.

The collection of the church tax is carried out as a wage deduction. This means that the employer is legally obligated to withhold the church tax of his employees, and pass it on to the revenue authorities. The employee is paid only the net salary. As the confessional affiliation of every employee is recorded on his card showing pay and tax, the employer knows the percentage of wage he has to deduct for the churches. The deducted church tax has to be paid to the revenue office, which takes on the management of the taxes. They then distribute the total amount of church taxes to the several churches, which are entitled to the church tax revenue.

By collecting the church tax as a wage deduction, the big churches make use of the possibility, given by law, to transfer administration of taxes to the revenue authorities. For this management service, the government receives or keeps about three to four percent of the total church revenue, which amounts to about 500 million marks, per church, per year, for service.

It is important to clarify that employers, in contrast to the state, are not paid. They do not get any remuneration for this service. This was heavily questioned in the German constitutional court, but was looked upon as compatible with the German constitution. The employer is listed without consideration of his own religious belief, or confessional affiliation. His activity in connection with the church tax collection is not caused by a commissioning by the church, but by the state. Therefore, he does not have a contractual claim for compensation, but his action is submitted as a subsidiary of the official tax administration.

As the church tax is a real tax in the sense of the German tax system, there is the possibility to take legal measures against the church tax assessment. If a member of church does not agree with this tax assessment, he has access to the courts of law. As a rule, the administrative courts hear such cases.

Aside from the church tax, which provides most of the financial needs of the churches in Germany, the funding given by the state is the second keystone of the financing of the German churches. So, not only do the churches receive this church tax, but they also get money and compensation from the expropriation of ecclesiastic property under several secularizations. It is important to clarify that, although the churches were given the right to collect taxes, the state’s obligation to discharge its duties did not end.

Two different kinds of state duties, in the sense of Article 138 of the constitution, have to be mentioned. The first involve donations and money given. If they are public law corporations, they mostly have contracts, treaties, or concordats with the respective counties or states in Germany, out of which they have to pay certain amounts of money per year to these churches. For instance, in Bavaria, for those churches with public law corporation status, the state of Bavaria pays about 8 f.DM per member, per year, as a kind of remuneration to the churches. In addition, in several parts of Germany, the government pays for priests who work in schools, military, police, prisons, and so on.

As another part of the state obligations, the religious communities are exempt from several kinds of taxes, such as income tax, property tax, inheritance tax, and so on. A number of regulations also exempt public law religious communities from some official and court fees, for example, notary fees.

Let me finish by speaking about some smaller churches. To some extent, this also applies to churches and religious organizations that are not recognized as public law corporations if they are recognized as non-profit or charitable organizations. Normally, smaller religious associations hold this status. They need seven persons to create an association. They have to apply to the local court for registration. This takes between one to five weeks, depending on the court’s workload. For this application, they need bylaws that define the structure, representatives, elections, and so on. In addition, they have to apply—or they should apply—with the local revenue office for preliminary recognition as a charitable organization, which normally is granted for a year. Then they have to apply for permanent recognition as a charitable organization, which is valid for about three years, and will be checked every three years.

This procedure applies only for these smaller religions, not for the public law corporations. Every three years, you have to explain to the revenue office your income situation, activities for the public good, and how you spend your income. Normally, this is not a big problem. It may however, cause discrimination for two reasons. First, it is a burden, which religions that are recognized as public law corporations do not have. Secondly, this procedure creates the possibility for the bureaucracy to cause illegal difficulties for religious organizations. To prevent such behavior, the respective organization would have to take court action against the decision of either the revenue office or the local court.

Although there are many flaws in the system with respect to discrimination against smaller churches, there were intensive discussions years ago about the church tax system. Today it is extremely unlikely that any change will occur. Even in connection with the harmonization of laws in Europe, the two big churches have already decided that they want to stick to this tax system, and the EEC has already decided that every member state may have its own church-financing system for social reasons or whatever.