Italy, Vatican sign financial information exchange deal

By Philip Pullella
Reuters
April 1, 2015

http://www.reuters.com/article/2015/04/01/us-vatican-financial-idUSKBN0MS3RJ20150401

(Reuters) - The Vatican and Italy signed a financial information sharing agreement on Wednesday in which the Holy See pledged full cooperation and transparency and effectively relinquished banking secrecy.

The Vatican has long been criticised by international financial organisations for providing a tax haven for well-connected Italians.

In particular, the Vatican bank for decades allowed many Italian citizens to hold bank accounts. That practice, which was in violation of the bank's mission to manage money for the Church, helped individuals evade taxes and launder cash, Italian law enforcement officials say.

Pope Francis has made financial reform a central plank of his two-year-old papacy and the bank, officially known as the Institute for Works of Religion, has been undergoing change. As of July, it had blocked the accounts of 2,000 clients and ended some 3,000 "customer relationships".

The deal, announced in two separate statements from the Vatican and the Italian Economy Ministry, came after months of negotiations and will cover information from 2009 onwards.

Vatican Foreign Minister Monsignor Paul Gallagher, writing in the Vatican newspaper, called it "a significant step by the Holy See towards the goal of maximum transparency in financial relations".

The statements said the agreement was based on the most recent and widely recognised international standards, similar to accords Italy signed recently with Switzerland, Monaco and Liechtenstein.

Gallagher said the Vatican would give Italian authorities all relevant information and would not oppose requests by invoking "the bond of financial secrecy".

The full text of the agreement, which has to be ratified by Italy's parliament because the Vatican is a sovereign state, was expected to be published on Thursday, the Vatican said.

One complicating factor concerned how the agreement should treat money held in the Vatican by religious institutions and orders of priests and nuns based on Italian soil in Rome but with money in the Vatican.

Some religious institutions run guest houses but some of the profits go to help missions in the developing world or for charity purposes -- money the institutions feel should not be taxed by Italy.

The details of how these institutions would be treated were not released.

Vatican deputy spokesman Father Ciro Benedettini told reporters that religious institutions based in Italy as well as Italians who work in the Vatican will start paying tax on financial gains starting with the 2014 fiscal year.

While Vatican regulatory bodies such as its Financial Intelligence Authority have signed agreements with counterparts, the deal was the Vatican's first with another country.