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|Israel and the Holy See
"If we follow these decisions, churches should pay taxes in Israel on the profits made in Israel by their schools, hotels, hostels, hospitals, and so on, and pay state and municipality taxes relating to properties that are not places of prayer, such as dormitories and priest residences.
In December 2017, the Jerusalem Municipality asked for payment of unpaid commercial taxes amounting to 650 million shekels (about $186 million) and froze church bank accounts.
This led the Church of the Holy Sepulcher and other churches to demonize Israel, going so far as to imply that Jerusalem does not belong to the Jewish State. For the Holy See and other churches, Jerusalem must be internationalized and become a corpus separatum. (This is not a new demand. During the Mandate period in Palestine, Catholic Church leaders complained, as do Arabs today, about the “Judaization” of Jerusalem.)
The Churches insist that they are not obliged to pay taxes to the Jewish State, even though their scripture states that “…it is necessary to submit to authority, not only to avoid punishment, but also as a matter of conscience”(Romans 13:5).
Following protests and international pressure, then-Israeli PM Benjamin Netanyahu suspended tax procedures on Jerusalem church institutions, and committees were set up to “bury” the problem (a common tactic). The COVID-19 pandemic temporarily led to the closure of some of the affected “tax-free” places."