Italy's government announced measures on Friday to end tax exemptions on commercial property owned by the Catholic Church, a move expected to add as much as 600 million euros ($805 million) to state coffers each year.
Prime Minister Mario Monti, who is a practicing Catholic, tacked the measure - which also affects other non-profit organisations - onto a larger deregulation package currently going through parliament.
The Church owns many private clinics, hotels and guest houses that enjoy tax exempt status because parts of them are also occupied by priests or nuns, or have a chapel.
The new law closes this loophole, which had granted tax exemptions to many structures that were predominantly commercial.
Monti asked Italians in December to make tough sacrifices as part of a severe austerity plan to stem contagion from the euro zone debt crisis.
In a 48-hour period after the austerity package was passed, more than 130,000 people signed an online petition demanding that the Church be stripped of much of its tax exempt status and pay its fair share.
The new law will have a "positive effect on revenue", the government said without giving an estimate. The income it makes from the measure will go towards cutting taxes, not reducing Italy's massive debt, it said.
According to an estimate by Italy's association of city governments, the new taxes will bring in between 500 and 600 million euros per year.