Latest Headlines

Approach to property tax causing confusion

The Cyprus government plans to raise money by adjusting the valuation of real estate, which is still being calculated at 1980 prices, has sparked a political storm that has added to the general confusion surrounding the issue.

DEPUTIES from the all the political parties, except AKEL, have slammed the plan and so have representatives of businesses, who argue that the government could not have chosen a worse time to impose higher taxation on a struggling sector – land development companies.

Everyone is right. Taxing real estate on 1980 valuations is ridiculous, considering prices have risen by about 20 times in the last 30 years causing a big distortion in the real estate market. Developers, who would be faced with an exorbitant tax bill if the adjustment was made, are also right, as property sales have ground to a halt and they are currently struggling to make their loan repayments.

DISY deputy Averof Neophytou’s proposal that bank deposits and shareholdings should also be taxed if the government wanted to tax wealth was also correct. Why tax a man who invested millions in real estate and not a man who keeps his millions in a deposit account or in company shares?

It was a perfectly legitimate point that undermined AKEL’s effort to turn the row into a confrontation between the protectors of the poor and the guardians of the wealthy. Of course the mention of the idea of taxing bank deposits terrified finance minister Charilaos Stavrakis. Any such measure would simply lead people to move their deposits to banks abroad said Stavrakis urging politicians to refrain from repeating such a disastrous idea.

All this confusion and bickering was caused by the government failing to do its homework and thinking the idea through. The change in the valuation of real estate is a complex procedure, which according to one deputy took 15 years to complete the last time it was undertaken in 1980. It was ready in 1995 when the valuations were already out of date. Is the government now expecting the Land Surveys Department to complete the task in a few months? It did not even consider who would have to pay the real estate tax. Initially we heard it would be people whose property holdings were in excess of €300,000 and then Stavrakis said it would be those whose holdings were in excess of €1 million.

Neophytou claimed that the new measure would affect 90 per cent of the population, but in the last couple of days the interior minister was at pains to assure everyone that less than two per cent of the population would be affected by the measure. This is what happens when a policy decision is not properly prepared and thought out. The government has been improvising this policy relative to the daily political criticism leveled against it, and exhibiting an unbelievably slapdash approach.

The professional approach, would have been to work out everything in advance – the tax threshold, the amount of money that would be raised, the time needed for the new evaluations, the date the measure would be put into force and percentage of the population that would be affected. Only then would the confusion, misinformation and scare-mongering have been avoided.

Readers' comments

Comments on this article are no longer being accepted.

  • Text size


Back to top