March 26, 2010

Church of Greece To Challenge the New Tax

Greek Churches to be Taxed in Govt’s Response to Economic Crisis

March 24, 2010
By Hilary White

The Greek government has announced it will start taxing churches as part of its efforts to get out of its financial crisis. A new draft bill to be tabled in parliament next week imposes a 20 per cent tax on the Orthodox church's real estate income, reportedly worth over 10 million Euros (US $14.8 million) a year, the Wall Street Journal reports.

The Orthodox Archbishop of Athens Ieronymos said on Sunday that taxing the churches is unconstitutional and “unprincipled.” He told the Athens weekly, Real News, that the Church of Greece would challenge the tax in the Greek and European courts.

He proposed instead a calculation based on revenues and expenditures, rather than real estate income, with the Church paying 20 percent tax on the remainder of their net income.

“The state is telling us that 'we don't know what your (Church) revenues are; yet, I want 20 percent of what you receive'. This is unconstitutional,” he said. The archbishop dismissed media accounts of the Church’s wealth. “Come and show us where this money is,” Ieronymos said.

Greece is in the midst of a massive economic crisis that analysts have warned could have far-reaching effects throughout the Eurozone. EU leaders have accused the country of encouraging a financial culture characterized by insoluble public and private debt, tax-avoidance and systemic corruption. Greek government debt was estimated at €216 billion in January.

The European Union has imposed a set of criteria that must be met by the government, and on March 5 parliament passed the Economy Protection Bill, that imposed strict austerity measures, which is expected to save €4.8 billion.

The German government is under heavy pressure from the EU to open its purse and produce a bail-out for Greece to save the Euro from collapse. Leaders hope that the German government will cave at the EU summit later this week. Germany, which can borrow at the lowest interest rates in the E.U. and has the Union's largest economy, has resisted the pressure, but Chancellor Angela Merkel said on March 5th that Germany would “stand by Greece.” The argument has threatened to weaken the EU’s financial hegemony.

The Greek financial crisis is part of a larger economic melt-down that is being called the European Sovereign Debt Crisis. Other countries caught in the crisis are Spain, Ireland, and Portugal. Fears over the crisis have led to a weakening of the Euro and a widespread global stock selloff in February.

Economists are arguing over whether the Euro can survive the crisis. Desmond Lachman, a senior fellow at the conservative American Enterprise Institute, said at a conference hosted by the Carnegie Endowment for International Peace in Washington that the Greek government should revert to the Drachma. The Euro, he said, is a “disastrous experiment” born of political ideology rather than sound economic theory. Continued membership in the Euro, he said, would result in the Greek government having recourse only to tax increases and cuts to public spending to overcome its massive debt problem.

Meanwhile, unemployment has risen sharply in Greece during the crisis, and nationwide strikes have been launched in opposition to the austerity measures. Prime Minister George Papandreou told a European Parliament Committee earlier this month that the EU’s refusal to provide a cash bailout will force the country into the arms of the International Monetary Fund for a financial rescue.

After a meeting in Brussels last week, Papandreou said, “What Greece is asking for is to be able to borrow on the same conditions as other countries, so that Greek peoples' sacrifices will not be wasted due to high interest rates.”