IT is not surprising that the reappraisal of property taxes announced by Cyprus Finance Minister has been attacked. It will discourage further investment in real estate and will cause yet more problems for the Island’s struggling property industry.
Chairman of the Cyprus Land and Building Developers Association, Lakis Tofarides, said that the state already receives 27% of a property’s price and wonders how much more money the government wants from an industry that is in decline.
There are hundreds of thousands of properties in Cyprus and reappraising their value will not be a straightforward task and will surely take many years to accomplish.
A similar reappraisal was carried out in the UK which resulted in the introduction of the now familiar ‘Council Tax’. The Council Tax was the successor to the very unpopular Poll Tax (Community Charge) which contributed to the downfall of Margaret Thatcher following the Poll Tax riots in London earlier that year.
Each dwelling is allocated to one of eight bands coded by letters A to H (A to I in Wales) on the basis of its assumed capital value (as of 1 April 1991 in England and Scotland, 1 April 2003 in Wales). Newly constructed properties are also assigned a nominal 1991 (2003 for Wales) value. Each local authority sets a tax rate expressed as the annual levy on a Band D property inhabited by two liable adults.
Many reappraisals were carried out by driving past homes and allocating bands via a cursory external valuation, which resulted in many properties being placed in the wrong band. And as a local councillor I helped a number of my constituents successfully appeal their band allocations.
The reappraisal of property values in Cyprus is complex
- Firstly, there is a much higher percentage of ‘individual’ homes in Cyprus than there is in the UK requiring much more investigative work to give each one a fair valuation.
- Secondly there are currently some 130,000 properties without Title Deeds and have no 1980 value to be reappraised.
Also, the proposed reduction in state employees by freezing recruitment for two years, halting the employment of part-time workers and cancelling full-time positions that been vacated begs the question – who is going to carry out the reappraisals?
An alternative approach
Another country not too far from Cyprus managed a 24% increase in property sales during the first nine months of 2009 according to a report in the Overseas Property Professional. The report said that a cut in that country’s Title Deed fees and Value Added Tax, as well as promotions by property developers, helped it to sell 416,000 units between January and September.
Maybe the Cyprus government should consider a similar move which could result in increased sales of property and a consequential increase in much needed Tax receipts to help replenish government coffers.
And if the government could somehow manage to issue all of the Title Deeds for the 130,000 properties without them, it would receive a massive €1,040,000,000 – based on the Interior Minister’s assumption that the average charge to complete the issue of a Title Deed is €8,000.
The Island’s Interior and Finance Ministers are meeting today to discuss the technical issues involved in implementing the recently announced proposals for reassessing property tax rates. We will bring you further news as it becomes available.