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Economical Activities of Religious Organizations and Their Financial Relations With the State in the Russian Federation

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This is a short paper about economic activities of churches in Russia
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  Zokirjon Abdusattarov, LL.M. StudentCentral European University Economical activities of religious organizations and their financial relations with the statein the Russian Federation Activities of religious organizations are not limited to manifesting religion in group, providingreligious education, organizing religious ceremonies and charity events; almost every religiousactivity involves inseparable economic or financial matters. For the religious organizations toexist they need a building, which is located on a certain state territory, they need certain types of  property, such as, household articles, which include, lamps, chairs, tables, carpet, and some other items which are needed for church personnel and visitors to live and work. In addition, churchesare in need of public service, amongst which we can count electricity, gas, cold and hot water,access to public roads, to public media and health service. In the given circumstances, whenthere is a constitutional doctrine of prohibiting institution of state-sponsored religion 1 and stateand when the laws 2 of the state allows churches to conduct limited commercial activities, wherecan churches get money, property and land? And at the same time, how can the state regulate or monitor financial activities of churches? Apparently, churches are internally the least controlledorganizations in the Russian Federation. The area concerning economical activities of religiousorganizations, namely, financial relations of the Russian Orthodox Church with the state and itsinternal financial regulations is one of the particularly fascinating subjects to investigate.Because of its special status in the society and state, the Orthodox Church is left with muchwider discretion in running its economical activities 3 . Churches represent a unique type of organization, which has an internal hierarchical structure and subordination that have beenfunctioning over several centuries and. Standing in a higher position in this hierarchy may placethe church at a privileged economical position than the other churches.In this paper, I will explore the issue of where churches get money. I will talk aboutfinancial sources of churches, how they run their business, economic dependency of lower churches in the hierarchy on higher or on the state, issues relating to lands and properties whichwere confiscated from the Russian Orthodox during the Soviet Union, corruption withinchurches and some other related issues.Churches as any other type of organization cannot operate properly without having money andcapital. Sometimes influence and power of the churches can also rely on its economic well- being. If they have more money, they are capable of organizing more religious events, launching programs targeted to fight against drug addiction, rehabilitation of released prisoners and someother activities. But the question is what sources of funding are available for churches to cover their expenses and extend their activities? Basically, there are two major ways churches can haveincomes. Below I will describe them under subsections.1. State funding and cooperation. Despite the fact that the Constitution of the Russian Federation provides that Russia is a secular state and no religion can be instituted as state-sponsoredreligion , there exists certain level of indirect and direct governmental financial support andcooperation. Article 4.3 of Law on Freedom of Religion of 1997 states “The state shall effectregulation in granting to religious organisations tax and other exemptions, extend financial,material and other assistance to religious organisations in the restoration, maintenance and protection of buildings and projects being monuments of history and culture as well as inarranging the teaching of general educational subjects at educational establishments set up byreligious organisations as is envisaged under the laws of the Russian Federation on education.” 1 Article 14 of the Russian Federation Constitution, 1993, onhttp://www.russianembassy.org/RUSSIA/CONSTIT/chapter1.htm 2 According to the Civil Code of the Russian Federation (First Part)] ss 117, 213 (Nov. 30, 1994), religiousorganizations are allowed to undertake entrepreneurial activities only for the accomplishment of purposes thatcorrespond to the purposes for which they were created. 3 ЭКОНОМИЧЕСКАЯ ДЕЯТЕЛЬНОСТЬ РУССКОЙ ПРАВОСЛАВНОЙ ЦЕРКВИ И ЕЕ ТЕНЕВАЯСОСТАВЛЯЮЩАЯ,Michael Ededshtein, Nikolay Mitrokhin, http://corruption.rsuh.ru/books/5-7281-0453-3.shtml, 1.2001  Zokirjon Abdusattarov, LL.M. StudentCentral European UniversityArticle 3.4 of the same law provides that certain state buildings and lands shall be transferred toreligious organizations for free of charge. In these provisions we can see four forms of support:1) the state supports religious organizations through providing financial aid for the restoration of their buildings; 2) the state supports religious organizations through providing land and buildings 4 ;3) there is cooperation in teaching of general educational subjects in religious schools4) the state exempts religious organizations from taxes and from other financial duties.Besides these, the state can support cultural and social programs of religious organization whichtarget hospitals, cemeteries, children's homes, charities and some other related activities 5 .1) At first sight, though it looks like there is a well established legal base for the statesupport, in reality application of these legal norms is much different. Not every religion benefitsfrom these legal norms; only those religions which have existed over centuries are privileged.The Russian Orthodox Church is the main beneficiary of these regulations. In 1995approximately 200 bln roubles was spent on restoration of church buildings, more than 100 blnroubles was spent on similar purposes and in addition more than 4000 buildings were given toreligious organizations from 2001-2006 6 .I am going to provide one example as to the proportion of support made on two differentreligions. In a meeting with the Head of Religious Administration for Asian part of Russia, Nafigulla Ashirov, the Muslim community of the province of Tobolsk expressed their concernsabout the Christianization of the province where one third of the population are Tatars, who areusually Muslims 7 . There are forty churches and only one mosque. According to Ibrahim Sukhov,imam-khatib of the Mosque in Tobolsk, in 2005 federal government spent 2 bln and 248 mlnroubles on the restoration of historical monuments. But only after long attempts muslimcommunity was able to get 2 mln roubles for the restoration of the mosque in 2007 despite thefact that Tatars are also equal citizens of the Russian Federation and they constantly pay their taxes to the government.2) The next issue is returning 3 mln hectare of lands, which was taken away byBolsheviks, to the Russian Orthodox Church. This issue has been subject to hot debates amonggovernment officials and church leaders as well. The Russian Orthodox Church was claiming for the lands, which it used to own. However, the state cannot return them because of the legal and practical reasons. First of all, the lands, which were confiscated in early XX century now owned partly by people, partly by organization and the state itself. People and organizations who possess these lands will not give away their lands to the Church; it would be in violation of their right to property and land which has been fixed in the Constitution, the Civil code and in anumber of international instruments. Secondly, the vice-chairman of the governmentadministration of the Russian Federation, the Constitution A.Volin emphasized that the RussianFederation is a secular state and churches cannot be given special economic treatment 8 . Therewere some other convincing arguments as well. According to I. Morozov, a member of theCouncil of the Federation, if the lands were returned, other people whose lands were confiscated because of ‘gulags’, would also claim to address the past injustice and to return their lands. Itwould lead to further complication. Moreover, he noted, the Russian Orthodox Church is a non-commercial organization and in case transfer of lands were carried out, it would not be clear what would be the status of those lands, whether they would pay taxes for the profits from usingthese lands. 4   5 “ The state cooperates with and supports the charitable activity of religious organizations and their achievement of socially significant cultural-educational programs and celebrations” Article 18(3) of Law on Freedom of Conscienceand Religious Associations of 1997. 6 CHURCH-STATE RELATIONS IN THE RUSSIAN FEDERATION, Andrei Oskarovich Protopopov, 1996Brigham Young University Law Review 7 Тобольские мусульмане добились от властей выделения средств на реставрацию соборной мечети города,05.05.2006 ,  News achieve onwww .islam .ru 8 News archieve onwww.utro.rufrom 31.07.2002  Zokirjon Abdusattarov, LL.M. StudentCentral European University3) The new church-state model of the Russian Federation which has evolved after 1990ies has significantly broadened the social activities of religious organizations. Religiousorganizations have started participating in providing social security to the vulnerable layers of society. Religious organizations engage in a number of social activities, such as, combatingagainst drunkenness, drug addiction, lack of spirituality, providing shelter to homeless, helpingto street children. The state being well aware of the positive effects of these activities tries tofinancially support religious organization in carrying activities, the state tries to facilitate accessto prisons, orphanage, schools and other social and governmental institutions. As social spheresthat Church and state needs to cooperate has enlarged, there was a need to coordinate andregulate these relations. In 2004 a new law draft “On Social Partnership of State and ReligiousOrganizations” was introduced. The law draft consists of 26 articles and covers all main aspectsof cooperation in social sphere. It regulates when both state and religious organization areengaged in the same project how to calculate the costs and expenses. And it gives permission toreligious organizations to involve in certain activities such as visiting military camps, givingadvice to the Ministry of Internal Affairs and Ministry of Defense when there are armed conflictswhich has nationalistic or religious base.4) Religious organization are exempt from taxation when they carry out religious, culturalactivities and also when they sell religious articles which are part of their religious identity.Religious organizations as any other legal entity in the Russian Federation are obligated to pay property, land, advertisement, transport taxes.In this section I want to talk about briefly attempts of metropolitan (bishop) Kirill Gundyaev tointroduce a new type of income tax, according to which, citizens when they are paying their income tax can direct their tax to religious organizations. He said that individuals themselveswill select to which religious organizations their tax will go so that principle of equality ismaintained. The opinions of authorities have dispersed on this issue. The first vice Minister of Finance, Sergei Shatalov stated that as it was possible to exempt certain economic activities,which makes charitable donations, from taxes, it would be possible to consider church as acharitable organization and direct income taxes to it. But Minister on Taxation, GennadiyBukaev did not agree with this position. He said that since Church is separated from the State,individuals themselves can independently donate to religious organizations; it is not necessary todo that via the state. Metropolitian Kirill brought quite contrary argument to G.Bukaev’sopinion. In his view, the state is funding a lot of programs, which are separated from the state.He argues that creative activity of painters, writers and poets are not part of the state structure but the state does support these activities. He noted that if the state supports only the stateinstitutions, it is a normal state.One of the arguments against the directing income tax to religious organizations was thatif it is done so, the state will have moral and legal base to control the economic activities of church. Metropolitian Kirill rejected this argument. He said that the state anyway is controllingtheir economic activities, the doors of the churches are always open to state auditors.2.  Economic activities of churches. Churches not only makes expenditures when it operates but also gains some profit from certainactivities. In particular, churches produce and offer certain religious services and goods and inthis way they will make some money out of it. What kind of goods and services could that be?They can be products or items for carrying out religious rituals, they can be religious symbolswhich can ornate the interior of the building, they can be jewelleries and some other ornaments.Churches offer service like christening children, requiem service, consecration and some other services.  Zokirjon Abdusattarov, LL.M. StudentCentral European UniversityThe below given data is taken from the interview with three clericals from the Eparchy of theRussian Orthodox Church of Moscow Patriarchate – Ivanokskiy, Kostromskiy and Yaroslavskiy- between 1998-2000 9 . Each Eparchy contain about 150-200 churches and 14-15 Monastery.The profit that churches gains differs based on their location. Churches located in a city conductmore profitable business than churches in a country. Ordinary a country church makes aboutfrom 1000 USD to 1200 USD per year. From this money they distribute salary to all who work in the church, they buy candles, buy dough for cooking communion bread and wine for Eucharist. Country churches seldom receive financial aid or support from higher churches or thestate. Financial well-being of these churches sometimes depends on the activeness of priests tofind sponsors, to have connections with the local government, and have good relations withchairmen of nearest state farms and etc.60-70 % of the income of these type of churches come from selling candles. Other 20-30 % of the budget is formed from occasional religious rites, such as funerals and weddings. The other income is made from selling articles of worship, books and religious symbols.Because of lack of resources churches in a country cannot provide the security of the church.They are financially not capable of installing signalization and security measures. As a result,churches in a country are exposed to rubbings.Interesting aspect of church’s financial activities is competition among them to gain more profitto maintain their church or flourish it. In several occasions it was observed some churches didnot allow visitors to come to church with candles bought in another church.Or other more interesting events happened in Ivonovsky Eparchy. There several churches foughtfor occupying the more lucrative sites for getting donations in the central market of the city.Analysis of the church book keeping showed that there always exists double bookkeeping andinformation reflected in the official documents usually are not correct and thorough. Shadoweconomy of churches generates from unregistered donations and from profit uncountedoccasional religious rites. Shadow profit gained from occasional religious rites can reach asmuch as 90 % of the real amount.Bookkeeper can raised the expenses for restoration in the report or lower the number of candlessold. Financial reports of economic life of the churches virtually are not checked and because of this numbers showed in the reports are not made with due consideration.In some occasion churches run their underground business. In February, 1999 the police foundunderground manufactory which produced vodka in the church called “Red Church” which islocated in Voskresenskiy 10 .Though the Russian Orthodox Church is centralized and lower churches have obligations todirect some percentage of their profit to the higher churches, churches in each stage run their own business activities. Lower churches might occasionally send insignificant amount of ‘taxes’to higher churches when they are in economically good position. 9 ЭКОНОМИЧЕСКАЯ ДЕЯТЕЛЬНОСТЬ РУССКОЙ ПРАВОСЛАВНОЙ ЦЕРКВИ И ЕЕ ТЕНЕВАЯСОСТАВЛЯЮЩАЯ,Michael Ededshtein, Nikolay Mitrokhin, http://corruption.rsuh.ru/books/5-7281-0453-3.shtml, 1.2001 10 Святая водичка // Вичугские новости. 1999. 24 февраля.

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