At times when interest rates are diabolically low, the faith of the most fervent savers is tested. Not only does the taxman still want his share of your meager interest earnings, but so does the Church.
That is how it must have seemed to many in Germany when their banks informed them that they will begin systematically collecting the church tax from investment income too. That was clearly too much for some believers, and they officially left their churches — a process done through a form at a local court — to to avoid the tax, which can take up to 10 percent of an individual’s income in some states such as Bavaria.
And seeing their flocks dwindle further has enraged Germany’s clergy, pitting them now against Germany’s bankers.
The Lutheran Church in Bavaria registered 14,800 departures in the first half of this year —56.6 percent more than in the same period in 2013. In the largely Protestant Berlin-Brandenburg region, more than 10,000 left the church. That is more than in 2011 and 2012. In the southwestern state of Baden-Württemberg, the number of departures from January through March shot up by more than half.
The situation is equally as dismal for the Catholic Church. In the diocese of Rothenburg-Stuttgart, about 10,000 left the church in the first half of this year. By comparison, in all of last year 14,617 left the diocese. The number of departures varies from diocese and region. But the overall trend is a stark increase in people leaving.
The churches fear an exodus of biblical proportions for 2014. And they already have someone to blame: Germany’s banks.
Starting in 2015, financial institutions are required by German law to automatically take church tax from their clients’ investment income and forward it to tax authorities. The churches expressly wanted this in the hope of gaining more income.
Until now, it has been up to individuals to report investment income to their churches.
Since financial institutions don’t know the religious affliations of their clients, they sent letters to customers in recent months informing them of their obligation to begin directly deducting church tax from investment income starting in 2015.
“The letters come across very formally,” said Volker Rahn, a spokesman for the Protestant Church in Hesse and Nassau. “That naturally gave our members a shock.”
The banks sowed a feeling of uncertainty, Mr. Rahn said. Many falsely took the letters to mean that the church wanted to levy a new tax, he said.
There have been church taxes on investment income since 2009. What will be due at first is what falls over the exemption of €801 ($1,057) for individuals living alone and €1602 ($2,114) for couples. That applies to roughly one in five church members.
A tithing disaster
What was meant to increase state-levied tithes and to simplify the system has turned into an exodus of paying members.
On the heels of the controversy surrounding Germany’s so-called “Bishop of Bling,” the former Catholic archbishop Franz-Peter Tebartz-van Elst, who was sacked by Pope Francis for excessive spending on his personal residence, the churches are facing another taxing test of faith.
The departure of the faithful is increasing financial pressure on Germany’s churches.
The Catholic Church in Germany collected €5.5 billion ($7.25 billion) in 2013 and the Protestants, €4.8 billion ($6.33 billion). Taxes on investment income alone could bring the churches up to €1.4 billion ($1.84 billion) annually. Each person who leaves the church means a loss in revenue. For this reason, some church leaders are falling into a holy rage.
“We firmly reject the accusation that we would advise people to leave the Church.”
The situation has deteriorated into mutual recrimination between churches and banks.
The chief financial officer of the Evangelical Church in Rhineland, Bernd Baucks, has accused banks of advising clients to abandon their religion. He told the Frankfurter Allgemeine newspaper that he has “evidence” that “some banks” had recommended customers leave the church to avoid the investment income tax, which the banks deny.
Financial institutions are also outraged. “A bank would never give customers tax-related tips,” said a spokesman for the association representiung Germany’s credit industry. “We firmly reject the accusation that we would advise people to leave their church.”
Behind closed doors, bankers are calling on Mr. Baucks to give them proof. But the church official has suddenly gone silent. “We will make no further statements on the issue of church taxes on investment income and the advice from the banks,” a spokesman for Mr. Baucks said.
German bankers are still angry. In the end, they will be responsible for the costs of processing church taxes, while the tax revenue goes to the German government and the churches. Churches pay government tax authorities about €300 million ($396 million) a year for processing the tax payments.
Elected officials are jumping to the defense of their banks, not their churches. “Don’t push it on the banks! Look to yourselves,” Norbert Walter-Borjans, the finance minister in the state of North Rhine-Westphalia, said in an interview with weekly newspaper Die Zeit.
Mr. Baucks’own brethren openly contradict him. “That is one voice and in no way the position of the entire church,” said Thomas Bedrich, director of the finance department of the main Protestant church in Germany. Mr. Bedrich is trying to de-escalate the conflict and says there have been mistakes in communication.
The churches are trying to salvage what is salvageable. They are sending letters that are meant to explain the taxes to thousands of members. Whether or not their efforts will stem the tide of people leaving will not be known until the end of the year, when official membership numbers are released.