I thought the vatican was a sovereign state. the pope was head of state and therefor italy could not impose any law within the vatican.
he has his own army, police, etc and therefor he employs people as they are not volunteers. on PBS there was a good prog. that showed it costs 305 mill to keep the vatican and church running and income was 300 million. however they would not reveal what the vatican bank has in its coffers as it was off limits.
either way no one should be exempt from tax when there are so many loopholes available to the rich and powerful