LAWMAKERS yesterday asked the government to amend a bill that increases annual Immovable Property Tax (IPT) as part of the island’s bailout, as various interest groups suggest it is unfair and would only lead to bigger problems.
Landowners, property developers and hoteliers warn that the changes, which hike up the taxes currently based on 1980 values, will drive the economy deeper into recession.
Hoteliers yesterday suggested that the bill was unconstitutional and warned that they would file an appeal with the Supreme Court.
Haris Loizides, Chairman of the hotels association PASYXE, said the bill increased the tax a hotel had to pay nine-fold.
Loizides said a hotel that paid €27,600 in IPT last year would have to pay €253,380 in 2013.
Loizides said international lenders had asked for €60 million from immovable property taxation whereas the government bill provides for €180 million.
The Chamber of Commerce and Industry (KEVE) said the bill was unacceptable and that it would be impossible for the government to achieve the target.
KEVE proposed a flat rate of 1.5 per thousand that they say would raise €60 million.
The chairman of the developers Pantelis Leptos said it was an unfair bill that would act as a deterrent for investment.
The preliminary agreement between Cyprus and international lenders provides for updating the 1980’s property prices by applying the consumer price index (CPI) over 1980 to 2012 and amending tax rates for the value bands.
Until now, Immovable Property Tax was calculated based on the value of the property on January 1, 1980.
Under the new regime, the taxable figure would be the result of multiplying the value of the property in 1980 by around 3.5 – the CPI, according to deputy land registry director Andreas Socratous.
The updated value will then be taxed by applying the new rates. The first €150,000 is tax-free. From then on: €150,001- €500,000 coefficient of €6 per thousand, €500,001- €1,000,000 coefficient of €8 per thousand, €1,000,001 and above coefficient of €10 per thousand.
The director of the Inland Revenue department rejected suggestions the legislation was unconstitutional.
Giorgos Poufos said lenders had imposed “very conservative” calculations to be sure the target amount would be collected.
According to IRD data, 44,000 people would have to pay IPT under the new regime, while 293,000 would be exempted because their property was worth less than the tax-free threshold.
Of the 16,000 companies affected, 8,900 would be exempted for the same reason, while 2,500 would pay €111 million.
The state expects to collect an additional €18.9 million from 1,450 people whose property is worth over €1 million. Some €40 million will be paid by 38,500 people.
Main opposition DISY deputy chairman Averof Neophytou asked the government to find a fairer solution.
“If there is a will, we can find fairer solutions,” he said.
Neophytou suggested the tax would hurt middle income people.
“A middle class family who owned property worth €300,000 by 1980 prices paid €375 up until 2011; today they would have to pay €6,450. We are talking about 17 times more taxes,” Neophytou said.
Their property would now be valued at around €1 million.
Ruling AKEL MP Yiannos Lamaris said his party wants to make a lot of amendments if it was allowed – not only as regards the IPT.
He added however that 90 per cent of the people did not fall in any of the IPT tax bands.
The matter was discussed by the House Finance Committee, which also looked into several other austerity bills agreed with international lenders.
Before it was a bill that cut allowances to large families and students who voiced their opposition.
Large family organisation chairman Paraskevas Samaras said it was a “multiple hit.” The measures, he said, were wrong and unfair.
Civil servants also protested, saying they were “under persecution.”
They were complaining about a bill that changes public sector work hours in a bid to cut overtime and shift pay.
Some 20,000 people who live in the mountains are also complaining after the government decided to cut the heating fuel allowance afforded to them in winter.
Large families, teacher unions and people with disabilities, will hold protests against the austerity outside parliament on Wednesday.