Vatican City Economy Facts
The Vatican’s economic base is the compensation received from the Italian state when the Lateran Treaties (see Older History) and the Concordate (see Modern History) were concluded. The other major source of income is the “Petersen”, that is, the traditional voluntary contributions from the world’s Catholics. A third important source of income is the return from the Catholic Church’s investments. Tourism in the Vatican also generates significant income.
The Vatican’s budget has periodically suffered significant deficits, partly due to high costs for maintenance and restoration of the many historic buildings. However, the largest item of expenditure is the cost of personnel in administration and overseas missions as well as the operation of the Vatican’s radio, television and daily newspaper.
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Residents of the Vatican pay no Italian income tax. The Catholic Church has also been exempt from tax for its commercial properties, such as hotels and business centers. However, as a result of a deep economic crisis in Italy, the Rome government in 2012 decided to start taxing church commercial activities from 2013.
The Vatican’s bank, the Institute for Religious Activities (Istituto per le Opere di Religione, IOR), handles the finances of the church’s many institutions and community of communities with extensive relief activities. The bank has long been suspected of money laundering and in 2012 the Council of Europe’s control group Moneyval criticized the Vatican for not following recommendations on transparency. The same year, the IOR chief was forced to resign since he must have worked to increase transparency in IOR’s accounts but encountered resistance within the Vatican City.
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Already in the summer of 2013, the next IOR boss had to resign after a leading priest was arrested on suspicion of trying to exploit IOR for money laundering and to smuggle in € 20 million to Italy. (The priest was released from the charges in January 2016.) In November of that year, Pope Francis appointed Rolando Marranci as new bank manager. Marranci had been part of an independent consulting group which, on the initiative of the new pope, was set to review the bank’s progress.
In the fall of 2013, the Vatican introduced new finance laws to increase transparency and oversight and to bring the regulations in line with international standards, including when it comes to preventing money laundering and terrorist financing. In addition, some customers’ bank accounts were closed, which were not compatible with the bank’s religious motives. At the end of the year, Moneyval explained that the Vatican had made progress in the fight against money laundering, but that more remained to be done.
The Vatican’s control group reported 544 suspected cases of fraudulent banking transactions in 2015, compared with 147 such cases in 2014. The Vatican interpreted this as a manifestation of increased transparency in the banking system, while critics pointed out that only 17 of these cases went to court.
There is no agriculture and no industry in the Vatican except small-scale production of mosaics and service uniforms. The trade is limited to the sale of stamps, books, religious souvenirs and more from the shops owned by the church. The Vatican has its own postal, telegraph and coinage system. The Vatican’s rare euro coins are wanted by collectors.