Zokirjon Abdusattarov, LL.M.

Student
Central European University
Economical activities of religious organizations and their financial relations with the state
in the Russian Federation

Activities of religious organizations are not limited to manifesting religion in group, providing
religious education, organizing religious ceremonies and charity events; almost every religious
activity involves inseparable economic or financial matters. For the religious organizations to
exist 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, churches
are 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, when
there is a constitutional doctrine of prohibiting institution of state-sponsored religion1 and state
and when the laws2 of the state allows churches to conduct limited commercial activities, where
can 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 controlled
organizations in the Russian Federation. The area concerning economical activities of religious
organizations, namely, financial relations of the Russian Orthodox Church with the state and its
internal 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 much
wider discretion in running its economical activities3. Churches represent a unique type of
organization, which has an internal hierarchical structure and subordination that have been
functioning over several centuries and. Standing in a higher position in this hierarchy may place
the 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 about
financial 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 which
were confiscated from the Russian Orthodox during the Soviet Union, corruption within
churches and some other related issues.
Churches as any other type of organization cannot operate properly without having money and
capital. 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 some
other 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 have
incomes. 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-sponsored
religion, there exists certain level of indirect and direct governmental financial support and
cooperation. Article 4.3 of Law on Freedom of Religion of 1997 states “The state shall effect
regulation 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 in
arranging the teaching of general educational subjects at educational establishments set up by
religious organisations as is envisaged under the laws of the Russian Federation on education.”
1
Article 14 of the Russian Federation Constitution, 1993, on
http://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), religious
organizations are allowed to undertake entrepreneurial activities only for the accomplishment of purposes that
correspond to the purposes for which they were created.
3
ЭКОНОМИЧЕСКАЯ ДЕЯТЕЛЬНОСТЬ РУССКОЙ ПРАВОСЛАВНОЙ ЦЕРКВИ И ЕЕ ТЕНЕВАЯ
СОСТАВЛЯЮЩАЯ,Michael Ededshtein, Nikolay Mitrokhin, http://corruption.rsuh.ru/books/5-7281-0453-3.shtml
, 1.2001
 Zokirjon Abdusattarov, LL.M. Student
Central European University
Article 3.4 of the same law provides that certain state buildings and lands shall be transferred to
religious 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
buildings4; 3) there is cooperation in teaching of general educational subjects in religious schools
4) 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 which
target hospitals, cemeteries, children's homes, charities and some other related activities5.
1) At first sight, though it looks like there is a well established legal base for the state
support, in reality application of these legal norms is much different. Not every religion benefits
from 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 1995
approximately 200 bln roubles was spent on restoration of church buildings, more than 100 bln
roubles was spent on similar purposes and in addition more than 4000 buildings were given to
religious organizations from 2001-20066.
I am going to provide one example as to the proportion of support made on two different
religions. 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 concerns
about the Christianization of the province where one third of the population are Tatars, who are
usually Muslims7. 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 mln
roubles on the restoration of historical monuments. But only after long attempts muslim
community was able to get 2 mln roubles for the restoration of the mosque in 2007 despite the
fact 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 by
Bolsheviks, to the Russian Orthodox Church. This issue has been subject to hot debates among
government 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 a
number of international instruments. Secondly, the vice-chairman of the government
administration of the Russian Federation, the Constitution A.Volin emphasized that the Russian
Federation is a secular state and churches cannot be given special economic treatment8. There
were some other convincing arguments as well. According to I. Morozov, a member of the
Council 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. It
would 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 using
these 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 Conscience
and Religious Associations of 1997.
6
CHURCH-STATE RELATIONS IN THE RUSSIAN FEDERATION, Andrei Oskarovich Protopopov, 1996
Brigham Young University Law Review
7
Тобольские мусульмане добились от властей выделения средств на реставрацию соборной мечети города,
05.05.2006 , News achieve on www.islam.ru
8
News archieve on www.utro.ru from 31.07.2002
 Zokirjon Abdusattarov, LL.M. Student
Central European University
3) The new church-state model of the Russian Federation which has evolved after
1990ies has significantly broadened the social activities of religious organizations. Religious
organizations have started participating in providing social security to the vulnerable layers of
society. Religious organizations engage in a number of social activities, such as, combating
against drunkenness, drug addiction, lack of spirituality, providing shelter to homeless, helping
to street children. The state being well aware of the positive effects of these activities tries to
financially support religious organization in carrying activities, the state tries to facilitate access
to prisons, orphanage, schools and other social and governmental institutions. As social spheres
that Church and state needs to cooperate has enlarged, there was a need to coordinate and
regulate these relations. In 2004 a new law draft “On Social Partnership of State and Religious
Organizations” was introduced. The law draft consists of 26 articles and covers all main aspects
of cooperation in social sphere. It regulates when both state and religious organization are
engaged in the same project how to calculate the costs and expenses. And it gives permission to
religious organizations to involve in certain activities such as visiting military camps, giving
advice to the Ministry of Internal Affairs and Ministry of Defense when there are armed conflicts
which has nationalistic or religious base.
4) Religious organization are exempt from taxation when they carry out religious, cultural
activities 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 to
introduce 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 themselves
will select to which religious organizations their tax will go so that principle of equality is
maintained. 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 a
charitable organization and direct income taxes to it. But Minister on Taxation, Gennadiy
Bukaev 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 to
do that via the state. Metropolitian Kirill brought quite contrary argument to G.Bukaev’s
opinion. 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 state
institutions, it is a normal state.
One of the arguments against the directing income tax to religious organizations was that
if 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 controlling
their 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 certain
activities. In particular, churches produce and offer certain religious services and goods and in
this 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 symbols
which 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. Student
Central European University
The below given data is taken from the interview with three clericals from the Eparchy of the
Russian Orthodox Church of Moscow Patriarchate – Ivanokskiy, Kostromskiy and Yaroslavskiy-
between 1998-20009. 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 conduct
more profitable business than churches in a country. Ordinary a country church makes about
from 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 the
state. Financial well-being of these churches sometimes depends on the activeness of priests to
find sponsors, to have connections with the local government, and have good relations with
chairmen 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 profit
to maintain their church or flourish it. In several occasions it was observed some churches did
not allow visitors to come to church with candles bought in another church.

Or other more interesting events happened in Ivonovsky Eparchy. There several churches fought
for 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 and
information reflected in the official documents usually are not correct and thorough. Shadow
economy of churches generates from unregistered donations and from profit uncounted
occasional religious rites. Shadow profit gained from occasional religious rites can reach as
much as 90 % of the real amount.

Bookkeeper can raised the expenses for restoration in the report or lower the number of candles
sold. 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 found
underground manufactory which produced vodka in the church called “Red Church” which is
located in Voskresenskiy10.

Though the Russian Orthodox Church is centralized and lower churches have obligations to
direct 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 ТЕНЕВАЯ
СОСТАВЛЯЮЩАЯ,Michael Ededshtein, Nikolay Mitrokhin, http://corruption.rsuh.ru/books/5-7281-0453-3.shtml
, 1.2001
10
"Святая водичка" // Вичугские новости. 1999. 24 февраля.