Germany's Catholic Church is facing bankruptcy even though it collects €9 billion a year in tax, writes Derek Scally in Berlin

Another German company is teetering on the brink of bankruptcy. Hardly headline news in these recession-hit times, you might say. But when that company is the country's Catholic Church, in particular the archdiocese of Berlin, things get more interesting. Particularly when you learn that the Church collects more than €8.8 billion a year.

Church tax is a fact of life for members of Germany's Lutheran and Catholic Churches, each of which has 26.5 million members. German tax authorities deduct the levy - 9 per cent of income tax - keep about €3 billion for themselves and forward the rest to the bishops. But what is a fact of life for millions of Germans has become the death of many Catholic parishes. The formerly steady source of income is now costing them congregation members and cash: more than 119,000 Catholics left the Church last year, taking their church tax with them.

The situation is most dramatic in the archdiocese of Berlin, facing bankruptcy with debts of about €150 million despite an annual church-tax income of €68 million. Only 300,000 Berliners, or 9 per cent of the city's population, are paying Catholics. Last year 3,051 of them left the Church; this year officials expect the figure to rise by 10 per cent.

The money problems are compounded by the fact that one in five people in the city is out of work. "The high unemployment means people don't have incomes and don't pay income tax and therefore don't pay church tax," says Stefan Förner, a spokesman for the archdiocese of Berlin.

The archdiocese has drawn up a dramatic rescue plan for next year: halving the number of parishes, to just over 100, and firing employees. Förner admits it may even need to demolish churches, although he denies reports that up to 95 churches are facing the wrecker's ball, a fate last meted out by the East German communists. "Churches may need to be demolished but only in a few cases. First we try to sell them to other Churches or deconsecrate them for other use," says Förner.

The desperate financial situation has come about in the years since unification. Churches and presbyteries were renovated on credit because of favourable interest rates while the city's duplicate structures of everything from cathedrals and choirs to administration continued to exist, being dismantled only in recent years. "We always just depended on the fact that the money came," says Förner.

Representatives of the Church are experts at fending off criticism of the tax. They agree that nobody likes paying taxes but point out that without church tax they would be unable to do social work, pay administration staff or fund priests' pensions. According to Church figures, a fifth of the Catholic church tax is used to run hospitals and kindergartens that are viewed as vastly superior to state-run facilities.

Stefanie Uphues, a spokeswoman for the German Bishops Conference, says the system is unlikely to change even if it is costing them members. "I can imagine Churches in other countries envy our situation," she says. "With the tax we have a relatively steady income and are able to plan long term."

These days, the main long-term plan of the Catholic Church is how to survive. It was that survival instinct that led Church leaders to lobby for the formal introduction of the tax in 1892 by Otto von Bismarck, Prussia's Iron Chancellor, as compensation for Church property seized by the state in 1803. The tax was anchored in the constitution of the Weimar Republic as an expression of the separation of Church and state.

It survived the Nazi period relatively untouched and features in the post-war Grundgesetz, or basic law. The tax is unique, although Italy levies a tax on all citizens that may be given to a Church or charity of their choice. Critics say the tax is no longer relevant in an increasingly secular German society and that the Churches should finance themselves through their stock-market investments and property holdings.

Deciding not to pay the church tax in Germany has curious implications, including costing you your right to church services such as weddings or funerals. Church representatives neatly sidestep questions about how something as profane as German tax laws can possibly influence the future of your soul. "You are still baptised - no one can take that away from you - but you have chosen not to belong to the Catholic Church in Germany," says Uphues.

Experts on Church law are more willing to talk about the implications. "I like to think of it less as a tax and more as a membership. You are a member with privileges, and if you stop paying the privileges are revoked," says one expert who declines to be named. "But on a theological level you would not find a single civil law that would justify the church tax."

Despite a slight rise in numbers after unification, in 1990, there are now fewer Catholics in all of Germany than there were in the former West Germany, with nationwide Mass attendance down to just 15 per cent.

Tax cuts next year worth €15 billion will be a financial disaster for the Church, as church tax is calculated as a percentage of income tax; for the Church, tax cuts mean its income is also cut. Nevertheless, the Church closely guards its tax, one of its few remaining certainties in an uncertain world.

The Church says there is no discussion about changing the church tax and rejects any suggestion that the tax, introduced to save it a century ago, might now be the very thing to bring it down.

"Gavin", a 28-year-old carpenter from Wexford, used to be a regular Mass-goer, but after a year in Berlin he stopped attending. As a Catholic, however, he continued to pay 9 per cent of his income tax to the Church, in line with German law.

"My religion was important to me, but I had tried and failed for years to try and balance being Catholic with being gay," he says. Then, during the summer, he had enough. "It was when the Vatican issued the statement about homosexuals being evil. Then, during the hot weather, I heard the Pope ask people to pray for rain, which I thought made him sound like a crazy witch doctor. I started to really wonder what sort of a club I was a member of. The more I found out about leaving, the more it sounded like a contract for a gym," he says. "Once you stop paying, the services are revoked. Not very holy at all."

The official at the local court told him he was the 11th Catholic in his neighbourhood to leave the church that day. She gave him a form to sign and told him to forward a copy to the local tax office, to be refiled in "non-religious" tax category. "It was then that my last fears dissolved," remembers Gavin. "To leave the Church here, I had to go to a government office and the tax office, but never a church. That clarified in my head that it's all about money and nothing spiritual at all."

I'm still a Catholic, he remembers telling himself as he signed the form. He also recalls The Eagles striking up Hotel California on the radio in the background - "You can check out any time you like, but you can never leave."