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MPs reject property tax bill

MPs have rejected a government request to discuss and vote on the bill designed to increase Immovable Property Tax as part of the island’s bailout deal saying they needed more time to consider its ramifications.

cyprus_governmentMPs on Thursday rejected the cabinet’s new Immovable Property Tax (IPT) rates, opting instead to postpone discussions on the grounds that more time was needed to study the provisions in depth.

The government wanted the bill approved before Monday, when Eurozone finance ministers are scheduled to discuss the island’s bailout bid.

The bill, approved by the cabinet on Wednesday and submitted to parliament on Thursday, is in line with a preliminary bailout agreement and in theory it could fetch the government some €120 million in 2013.

The government requested the bill to be classified as urgent, meaning parliament would have to discuss and vote on it immediately.

However, the government’s request was rejected by majority vote – 31 to 17 with only ruling AKEL voting in favour. There were no abstentions.

Main opposition DISY deputy chairman Averof Neophytou stressed that despite the postponement, a clear message must be sent to international lenders that parliament remained committed to approve additional property tax after the necessary time was given to lawmakers to study the bill.

“We do not have all the information before us,” Neophytou said during the lunchtime session.

DIKO’s Nicolas Papadopoulos echoed Neophytou in that parliament remained committed to passing a tax bill, adding too that more time was needed to “examine the bill in depth.”

EDEK MP Giorgos Varnava felt the need to stress that this should not be interpreted as an attempt to protect privileged groups.

AKEL however, accused the opposition of trying to postpone discussion until after the presidential elections in mid-February, although House President Yiannakis Omirou said efforts would be made to put the issue back on the agenda and call another session before the elections once some discussion had taken place at committee level.

Nicos Katsourides, the party’s parliamentary representative accused his colleagues of hypocrisy. “In all the years I have been an MP, whenever an IPT bill came to parliament it ended up being shredded to pieces,” he said, adding that under the provisions it was clear that 78 per cent of all property owners would not be affected by the new tax. Wealthy property owners on the other hand, would be.

Addressing his opposition colleagues, Katsourides pointed out that no one had expressed any concerns when parliament hastily passed a batch of austerity measures in December that involved tax and other hikes affecting the man in the street.

Katsourides said the opposition’s intention was clear: “to not discuss the bill before the presidential elections.” “If your intentions are honest then come back in one week,” he added.

Earlier in the day the bill was discussed at the House Finance Committee.

Inland Revenue boss Giorgos Poufos and permanent secretary of the Interior Ministry Andreas Assiotis made it clear to deputies that even a small change would throw off the state’s calculation designed to bring in €120 million.

MPs reject property tax bill

Readers' comments

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  • The Voice says:

    @Denton
    The precondition is whether a Cypriot default would be a systematic danger to the European banking system. I would suggest it isn’t, in which case unless the Cypriots adhere to the requirements placed on them by the troika, they may not find the funds forthcoming.

  • Denton Mackrell says:

    @The Voice. Thanks for quote but does “That is one of the preconditions for money” refer to property tax reforms in Cyprus, banking reforms in Cyprus, transparency in effective anti-money laundering in Cyprus or what?? What exactly was Herr Schaeuble’s point??

  • The Voice says:

    Quoting from Bloomberg news today

    “Meanwhile, German Finance Minister Wolfgang Schaeuble said it still remained to be seen whether the banking crisis in Cyprus – which has a large exposure to Greece’s troubled banks – was a danger for the entire eurozone.

    “That is one of the preconditions for money to even flow from the euro-bailout fund,” he told German daily Sueddeutsche Zeitung and France’s Le Monde.”

    It looks to me like a bailout is far from a foregone conclusion.

  • Gavin Jones says:

    Costas.

    We all know full well why it would make perfect sense for title deeds to be issued. We also know that it’s not possible because the developers can’t pay off the banks which hold a large proportion of them using the already sold collateral as security: a nice, cosy conspiracy between the banks, lawyers and developers – with the connivance of successive governments.

    A mess of potage which is continuously being stirred by the above and which, it would seem, EU Commissioner Reding has absolutely no intention of throwing out despite its foul smell and rotting composition.

  • Costas Apacket says:

    John Swift – As Nigel points out collecting the IPT, using KEVE’s proposal, would bring in circa €100 million over the next 12 months, if everyone paid up.

    In contrast, issuing the reputed 130,000 outstanding Title Deeds would bring in circa €1.3 Billion.

    So this begs the question as to why the Cypriot Government is going to such efforts, and is in such a rush, to collect a tenth of the revenue that they could collect if they fast tracked the issuing of Title Deeds?

    In fact if the Government issued about 10,000 of the outstanding Title Deeds they would collect more or less the same revenue as collecting IPT from every household in Cyprus.

    Doesn’t make any sense does it, unless of course there’s something that the Cyrpiot Government are not telling us about?

    Opaqueness and a lack of transparency? Surely not?

  • Denton Mackrell says:

    @Nigel. With the certitude of denial, perhaps there is a reluctance to acknowledge owing others anything at all, so payment of all bills is treated begrudgingly. When scaled up to the whacking EU bailout debt that is going to have to be paid, no doubt the reluctance and grudge will be in proportion to it. One can envisage a rationalisation something along the lines of ‘We never owed it in the first place. We have done nothing wrong. It was all a wicked concoction by outside forces to destroy Cyprus. They have foisted this debt on us. Can’t pay, won’t pay!’

    The first step in changing compulsive and dependent behaviour is to get the patient to admit they suffer from the condition and that is harmful to them and possibly others. On that basis, it is hard to see any significant improvement occurring here any time soon.

  • @Denton Mackrell – I have to say that in my 11 years of living here, people appear very ‘relaxed’ about paying their bills.

    If you take Orphanides as an example – how many millions does the company owe its suppliers? You have to ask yourself why they continued to supply them – and why they didn’t seem to care about payment.

    Furthermore, the tax authorities do not not appear to be particularly proactive in pursuing non-payers.

    When we were building our house 10 years ago I was complimented by one of our suppliers who said he liked dealing with British people because they paid their bills on time.

    All very strange.

  • Denton Mackrell says:

    As Peter Davis says, not all businesses are paying the ‘new’ €350 additional corporate tax which started as a temporary emergency tax after Mari and has now become permanent and standard for all registered companies, even those that are dormant or not trading. My accountant tells me that many businesses are drawing their own red line and refusing to pay it.

    As far as I can see, businesses and individuals will really need to be forced to pay their taxes (their true liabilities rather than a fiction) but, on past performance of the tax authorities here, hell is likely to freeze over first. Rather than waiting for lengthy procedures to produce court orders for default, which can then be checked at the airports against passengers seeking to leave, perhaps a simpler system of providing immigration officers directly with evidence of, say, 3 months non-payment of taxes beyond the specified payment date would be more effective.

  • John Swift says:

    What about issuing title deeds wouldn’t that bring in a few Euros?

  • Peter Davis says:

    @Nigel

    At a time when people are being sent to prison for not being able to pay their electricity bills and collections are being taken for food and clothing.

    Where are these people going to find extra funds?

    Truth is any new tax will be ignored, much like court fines, the new tax will become optional.

    The last tax was imposed on businesses and not all of them paid it.

  • @Eddie Smyth – I think the Employers & Industrialists Federation (OEB) and Chamber of Commerce and Industry (KEVE) had the right idea.

    They proposed a simple one-off property tax for 2013 of €4.60/thousand as an interim stop-gap measure.

    Their proposal is that the tax should be paid on each Title Deed and will not be cumulative (i.e. not based on the sum of the 1980 values of properties registered to an owner).

    If calculated in the same way as last year, Immovable Property Tax would bring in €28 million this year – and their proposed one-off tax would bring in an additional €69 million.

  • Eddie Smyth says:

    It would appear that people with more than one property will be assessed on the value on all properties combined for higher IPT. This could be expensive for many of us who still have more than one property through default.

    People who have not yet received title deeds could also be totally fleeced by developers who will have all their projects lumped together for top rate IPT. Currently the number people waiting for title deeds is around 100,000.

  • UBoat says:

    I recon you all have hit the nail on the head as daft as it sounds that is what happens in Cyprus when you’re in the know.

  • Mike says:

    Too many vested interests among the members of Parliament to let this pass without a fight.

    I can just imagine the reply given – Dear European Finance Ministers, please approve our bailout funds on Monday as we are a little slow in taking all your proposals in and the weekend is upon us. Please be assured that as true as I’m riding this bike we will take a look at your proposals as soon as time permits and reach a collective and mutually beneficial decision.

    PS You are all invited to my daughters wedding and we would be honoured if you and your family would accept our invitation to stay at our Hotel as our guests.

  • Costas Apacket says:

    Peter, I don’t think there’s anything indirect about it. It’s all part of the plan.

  • Peter Davis says:

    So the wealthy 22% supporting the other 78% whilst the 78% pay nothing. I wish I had some of the land owned by those classed as less wealthy in our village.

    Figures have shown throughout history that the poorer people are, the more reliant they become on the State for health, family support and aid, much more so than the richer members of society.

    My neighbour who lives in a farm building owned by her family will no doubt escape the cost of paying IPT whilst the majority of Europeans who have bought in the last 12 years will all be caught in the trap.

    Isn’t this indirect discrimination?

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