The Holy See, often referred to as Vatican City or simply the Vatican, is the seat of the Roman Catholic Church and its ruler, the Supreme Pontiff or Pope. The Holy See is not only the world's smallest independent state, but the workings of its government and financial affairs are unique, as are its non-commercially based economic structures, which do not conform to any conventional
There is much confusion regarding the country's names, the Holy See and Vatican City. According to the country's permanent mission to the United Nations, the term Vatican City refers "to the physical or territorial base of the Holy See, almost a pedestal upon which is posed a much larger and unique independent and sovereign power: that of the Universal [Catholic] Church. …The State of Vatican City itself . . . possessed a personality under international law and, because of such, enters into international agreements. However, it is the Holy See which internationally represents Vatican City State." Since 1957, most agreements have been entered into by the Holy See as the supreme authority of the Catholic Church. The Holy See, then, refers to the governing bodies of the nation, while the term Vatican City refers to the physical nation.
The Holy See generates its substantial wealth through worldwide donations to the Church. These voluntary contributions are made by individuals of the Roman Catholic faith, and are known as Peter's Pence. The term dates back to the 8th century, when the custom of collecting money for the Church originated in the early English kingdom of Wessex, which imposed an annual tax of 1 penny (or pence) on each family to send to Rome. The custom spread, and nowadays, the largest sums are given by Catholics in the United States.
The Holy See has a special department to administer the funds that arrive annually and to distribute them according to the needs of organizations, charities, and individuals. However, because there are no rules governing when, how, or how much money is sent—or spent—it is not possible to give an accurate assessment of this income.
Additional revenues flow in from the massive number of tourists who visit the Vatican, and from international banking and financial activities that yield interest from substantial investments worldwide. A handful of small light-manufacturing enterprises within the state cater to particular domestic requirements such as printing of church publications, the production of uniforms for Vatican staff, the manufacture of religious mementos and mosaics for the tourist market, collectible items such as stamps and coins, and Vatican telephone cards.
Although the Vatican has never developed or promoted an organized tourist industry, tourism contributes significantly to the economy of the tiny state. The Vatican is one of Europe's outstanding tourist attractions. The city is rich in history and priceless cultural treasures, and its unique geographical location makes for its effortless inclusion in the itinerary of any visitor to Rome. Aside from the Basilica of St. Peter's, visitors flock to the Sistine Chapel, whose magnificent ceiling frescoes by the Renaissance artist Michelangelo have been restored, and to the extensive Vatican museums and libraries. Substantial sums come from tourists' purchases of souvenirs (most of them religious in nature), postage stamps, coin issues, and publications, and from admission charges to the Vatican museums, which can accommodate 20,000 visitors daily.
The sale of stamps, in particular the sale of special series to stamp dealers and collectors, has turned into a sizable enterprise since these have great appeal and increase in value within weeks of their issue. A limited number of each series is sold to private dealers and collectors who place advance orders, and the rest to religious orders and other church institutions, which, in turn, sell them on to dealers at a handsome profit. Thus, both the Holy See and the Church as a whole derive considerable gain from the trade in stamps.
State expenditure relates to the maintenance of buildings and infrastructure , the financing of foreign visits made by the Pope or his emissaries, the running costs of diplomatic missions and overseas offices, financing of charities, and the publication of the state's newspaper, L'Osservatore Romano .