The German Church’s taxing problem

A record church tax haul in 2022 is not all it seems.

The Catholic Church in Germany received a record 6.848 billion euros in church tax in 2022.

But that didn’t appear to be a cause for celebration for the country’s bishops’ conference, which released the results without fanfare June 30.

A pile of euro banknotes Images Money via Wikimedia (CC BY 2.0).  

The announcement came just days after the news that a record 522,821 Catholics formally left the Church in Germany in 2022.

Were Church authorities embarrassed by the bizarre situation in which they received a record-setting haul while losing an unprecedented number of members? 

Perhaps. But there was another, stronger possibility: The 6.848 billion figure was not all it seemed. 

Up or down?  

The bishops’ conference issued the new church tax figure last Friday without any written commentary. But it did present two items on the section of its website dedicated to the Kirchensteuer (church tax) that were clearly intended to set the sum in context.

The first was a table displaying the net church tax revenue from 1991 to 2022. It showed that church tax income increased by 1.7% in 2022 compared to the year before.

The second illustration was a graph with two lines. A dark blue line represented revenue per year in nominal terms, while a light blue line showed revenue adjusted for inflation. 

A chart comparing annual church tax revenue in nominal terms and church tax revenue adjusted for inflation. Source: dbk.de.  

The first line rose upward, even after a blip in 2020, at the height of the coronavirus crisis. But the second one pointed downward.

This meant that while church tax income hit a record level in 2022, its actual value was the lowest since 2014. Although 4.698 billion euros is still a lot of money, the direction of the light blue line will trouble German Church leaders.

Where the tax goes  

In Germany, religious communities that are corporations under public law have a right to levy taxes on their members. 

Every person in Germany — including foreigners — who declares a Catholic identity on an official registration form is required to pay an 8-9% surcharge on top of their income tax liability, depending on the region in which they live. This sum is collected directly from employees’ paychecks on the Church’s behalf by the state, which claims roughly 3% of the total revenue.

The only way for baptized Catholics to opt out of the system is to declare formally that they are leaving the Church, after which they are told they may no longer receive the sacraments, hold Church posts, or serve as baptismal or confirmation sponsors.

Church tax revenues help keep the German Church’s vast, complex machinery running. They pay the salaries of staff working in pastoral care, schools, and social institutions, and go toward pensions, the upkeep of church buildings, and aid projects abroad. 

They also keep afloat bodies such as the powerful lay Central Committee of German Catholics (ZdK) and underwrite contentious initiatives such as the “synodal way.”

While the synodal way called for sweeping changes to Catholic teachings and practices, it did not appeal for a reform of the church tax. Was this a case of turkeys not voting for Christmas? There might have been more to it than that. The Kirchensteuer is such an established feature of German Catholic life that, while Church insiders sometimes suggest mild reforms, its abolition seems inconceivable to most. 

Yet among rank-and-file Catholics, there appears to be a greater appetite for change. A survey published last year reported that 68% wanted the tax to be abolished.

German bishops tend to support the tax, arguing that the Church’s charitable activities would be greatly weakened without it. Even bishops who have misgivings about the system, such as Eichstätt’s Bishop Gregor Hanke, believe that an “abrupt exit” is impossible.

End of the ‘golden years’  

How is church tax revenue rising as membership sinks? This curious phenomenon has been dubbed the Kirchensteuerwunder, or “church tax miracle,” by tongue-in-cheek commentators.

According to the German Catholic news agency KNA, the rise in formal departures is “still more than offset by the overall economic development with lower unemployment, rising incomes and thus increasing tax revenues.”

But few observers believe that the church tax’s “golden years” will continue indefinitely. A 2019 study published by the Catholic Church and the Evangelical Church in Germany (EKD) predicted that, if trends continue, “in the year 2060, church tax revenues in all four regions [north, east, south, and west] will only be enough to cover half of the expenditures possible in 2017.”

Other analysts regard this projection as overly optimistic. 

Others still are more sanguine, arguing that most of those opting out of the system are in the younger age group, who would have made smaller contributions, while older and richer groups, such as highly paid academics, remain in the fold. They also note that the German Church has other reliable income sources. 

Yet German dioceses are already introducing austerity measures in light of rising “church exits.” The Diocese of Münster, for example, is reconsidering its future construction projects, while the Diocese of Rottenburg-Stuttgart expects to have around 40% less church tax revenue by 2040.

The growing sense of precarity may have weighed on the four German bishops who vetoed the release of money from a common fund to finance a “synodal committee” to implement the synodal way’s resolutions. The decision led to the July 1 closure of the office that supported the synodal way.

If the church tax enters a steep decline, bishops will face ever harder decisions. German dioceses may be forced to review how they raise funds for schools, nursing homes, hospices, and hospitals — or even consider divesting them.

Bad news for Rome

A drop in church tax revenue would also be bad news for the Vatican, which would likely receive less German largesse.

German giving to the Holy See already appears to be falling. Figures released last week showed that German Catholics gave 1.3 million euros to Peter’s Pence in 2022, down from 2.3 million in 2021, a drop of over 43%.

Germany slid from third in the countries giving most to Peter’s Pence to fifth place, behind the U.S., South Korea, Italy, and Brazil.

Vatican sources have previously told The Pillar that Germany was the largest contributor to Peter’s Pence as recently as the early years of Francis’ pontificate.

According to a breakdown published by the Frankfurter Allgemeine Zeitung last year, Peter’s Pence donations account for roughly a quarter of the funds that the German Church sends annually to Rome. 

Each year, Germany’s Catholics give a total of 9.8 million euros to the Vatican, the bulk of which (5.1 million euros) comes from a voluntary levy sent by the Association of the Dioceses of Germany (VDD).

Any change in this financial relationship would have a significant impact at the Vatican, which needs every last cent as it struggles to stabilize its finances.

A rich church for the poor

Germany is home to major Catholic charities such as Adveniat, operating in Latin America and the Caribbean, Misereor, focusing on serving the poorest of the poor, and Renovabis, which helps people in Central and Eastern Europe. 

While the pandemic and rising living costs were hurting charities around the world, Germany’s international Catholic relief organizations saw a rise in donations of around $39 million in 2021. 

In total, Catholic dioceses, relief agencies, and religious orders gave around $643 million to social and pastoral projects in the Global South and Eastern Europe that year (the most recent for which we have figures). That was a new record, passing the previous high of $616 million in 2018.

The church tax is not the only source of the big German Catholic charities’ income. Others include donations, legacies, and public funds. But the church tax is a notable part of it. So the effects of declining revenue would likely be felt well beyond Germany, by some of the world’s poorest people.

German Church leaders know that record revenue and record “church exits” cannot coexist forever. One day, the “church tax miracle” will be over — with profound consequences for Germany, the Vatican, and the developing world.