Is Germany’s church tax ‘miracle’ over?

For years income continued to grow as congregations shrank - now it looks like reality is catching up with Germany's dioceses

A critic of Germany’s church tax system once suggested it was nothing short of a miracle.

Image via www.elbpresse.de via Wikimedia (CC BY-SA 4.0). 

Each year, the journalist Peter Winnemöller noted, hundreds of thousands of people formally left the Catholic Church in Germany. But year after year, church tax income continued to grow.

But what Winnemöller facetiously called the “Kirchensteuerwunder” — the church tax miracle — may be over.

The German bishops’ conference announced July 8 that church tax revenue was 6.51 billion euros (around $7 billion) in 2023.

That’s a lot, of course, but it marked a 5% drop on the year before, when church tax income was a record 6.84 billion euros (roughly $7.4 billion).

What exactly is the church tax? How is the so-called miracle even possible? And is it truly coming to an end?

Death and church taxes

For many Catholics outside of Germany, the idea of a church tax is bizarre. But within Germany, it’s a largely unquestioned feature of Catholic life.

It’s telling that while Germany’s controversial “synodal way” produced 150 pages of resolutions calling for radical changes to Catholic teachings and practices, it did not offer a single proposal for reform of the Kirchensteuer. 

A cynic might say that’s because the tax helps to keep afloat the lay Central Committee of German Catholics (ZdK), which co-sponsored the synodal way alongside Germany’s bishops.

Perhaps, but it might simply be that few can imagine an alternative to a system that is rooted in the medieval practice of tithing but took on its present form in 1919.

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

Every person in Germany — including foreigners — who says they are Catholic on an official registration form must pay an 8-9% surcharge on top of their income tax liability, depending on the state in which they live. 

This sum is collected directly from employees’ paychecks on the Church’s behalf by the state authorities, which claim 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 vast machine of German Catholicism running. They pay the salaries of staff working in pastoral care, schools, and social institutions, as well as pensions and the upkeep of church buildings. 

They also help some of the world’s poorest people through Germany’s international Catholic relief organizations. These include Adveniat, which operates in Latin America and the Caribbean, Misereor, which focuses on serving the poorest of the poor, and Renovabis, which helps people in Central and Eastern Europe. 

For many German Catholics, the church tax is therefore a self-evident good — or at least an inevitable part of Church life.

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

Makings of a ‘miracle’

It’s not strictly true to say that church tax revenue in Germany has increased year after year.

A graph updated this week by the German bishops’ conference shows that at the turn of the millennium, revenue fell for several years before beginning a steady climb from 2005 onward. 

Even then, there were setbacks. Revenue fell again in the late aughts and also amid the outbreak of COVID-19. 

But overall, church tax income has risen, while the number of Catholics registered in Germany has declined by hundreds of thousands a year.

In 2000, there were just under 27 million Catholics in Germany. By the end of 2023, there were barely 20 million. But despite this shrinking tax base, church tax income was almost 2 billion euros higher in 2023 than in 2000.

Counter-intuitively, years that have witnessed record “church exits” have also seen huge church tax hauls.

A record 359,000 people formally left the Catholic Church in Germany in 2021. But that same year, church tax revenue was 6.73 billion, the second-highest level ever. 

In 2022, the departure record was broken again when 522,821 people disaffiliated. But in the same year, church tax revenue rose to an all-time high of 6.85 billion. 

How is this possible? 

One explanation, offered by the German Catholic news agency KNA, is that the “negative development” of falling numbers has been “more than offset by the overall economic development with lower unemployment, rising incomes and thus increasing tax revenues.”

Others suggest it’s because the highest-earning Catholics, who pay the largest sums in income tax, remain in the Church, while those who contribute smaller sums are leaving. That might explain how church tax revenue remains so robust despite hemorrhaging Church membership.

But even the sunniest German Catholic would probably accept that the situation is unsustainable. Surely there must come a point at which the fall in the number of church tax payers leads to a drop in revenue.

Catholic authorities in Germany certainly think so. In a 2019 study published jointly with the Protestant Church in Germany (EKD), which also receives church tax income, predicted that by 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.”

Trend or blip?

The latest figures show that Catholic church tax income fell by around 330 million euros (roughly $357 million) in 2023, compared to 2022.

Yet the Catholic Church fared slightly better in 2023 than the EKD, an alliance of 20 independent Lutheran, Reformed, and United regional churches.

The EKD announced in May that its church tax revenue in 2023 was around 5.9 billion euros in 2023, down from 6.24 billion euros in 2022.

EKD church tax income fell by 5.3% in a year — more than the Catholic decline of 4.9%.

An annual decline of 5% is not unprecedented for the Catholic Church in Germany. Church tax income fell by 4.6% in the coronavirus lockdown year of 2020. It also dropped by a steep 7.6% in 2004.

So it’s unclear from the headline figures whether this is a blip or the start of the long-awaited sharp downward trend.

Austerity now

Recently, the German bishops’ conference has released church tax statistics in a notably low-key fashion. It does so by adding data to two documents in an obscure section of its website, with no additional commentary. 

The first document is a table showing church tax income per year, percentage change per year, and percentage change compared to the year 1991, following the reunification of Germany.

The second document is the graph mentioned earlier, consisting of two lines. A dark line represents revenue per year in nominal terms, while a lighter line shows revenue adjusted for inflation. 

The lighter line suggests that the actual value of church tax income has been falling since 2021. It says that 2023’s haul of 6.51 billion euros is effectively worth 4.2 billion euros, the lowest actual value since 2011.

What is the bishops’ conference saying by presenting the figures in this way? Perhaps that the results are worse than they might seem at first glance. 

It may also be saying that the expected downward turn actually bega\n a few years ago.

Even if that remains debatable, there are signs that the Catholic Church in Germany is facing economic problems in the here and now, not in some projected future scenario.

The Diocese of Mainz, for example, announced in June that it’s preparing to curb expenditure by around 25% in the years ahead. 

The diocese in west-central Germany, serving around 621,000 Catholics, is financed largely by the church tax. In 2023, it received 221.3 million euros, down 6.9 million euros from the year before. 

The diocese’s finance director, Carsten Erdt, said he expected church tax income to continue to fall due to church exits and demographic change.

Other dioceses announcing a “Sparkurs” — austerity measures — include the Diocese of Dresden-Meißen, in the former East Germany, which has cut priests’ pensions.

The Diocese of Münster, in northwest Germany, has set itself the goal of saving 33 million euros, while the Diocese of Würzburg, in the country’s traditional Catholic heartland of Bavaria, is seeking to reduce its budget by 18% by 2030.

Given Germany’s significant economic influence in the wider Catholic Church, this belt-tightening will also be felt elsewhere. 

The Vatican, in particular, is likely to feel the pinch. Donations to Peter’s Pence from Germany have fallen from 4.9% as a share of all global contributions in 2021, to 3% in 2022, to a low of 2.7% in 2023.

In addition to Peter’s Pence contributions, German dioceses give around 5 million euros a year to the Holy See. But in a financially constrained future, perhaps that may one day be reviewed.

Anyone tempted to feel a little Schadenfreude at this prospect should bear in mind that the heads of Vatican departments will not be the only ones to feel the absence of German euros. 

The Catholic Church is so interconnected that one day, there may also be no money to repair a school roof in Guatemala or fund a clinic in rural Ethiopia.