THE GOVERNMENT has backed down from its intention to update immovable property prices by applying a formula that stakeholders had said would hike up taxes many times over and would drive the Cyprus economy deeper into recession.
The House plenum is due to discuss an amended bill on January 17 that will remove a provision to update property prices, which was part of the preliminary agreement between Cyprus and its international lenders.
Interior Minister Eleni Mavrou said that the bill would not now update property values using the Consumer Price Index (CPI) over 1980 to 2012.
“We’re going back to the 1980 values,” Mavrou said referring to the way immovable property tax is currently calculated, which is on the property’s value on January 1, 1980.
Lawmakers recently discussed, but postponed voting on, a previous bill that was going to update the values to 2012.
Hotels said that would increase by nine times the amount of tax a hotel would have to pay, and stakeholders and lawmakers asked the government to amend the bill.
“It now seems that the amount that we must aim for is significantly lower than the €180 million we were discussing,” Mavrou said.
She said that the terms of the amended bill are under discussion with Cyprus’ lenders and the finance ministry to clarify how much the government should aim to receive in taxes, though she added the figure might be somewhere over €60 million.
It was not immediately clear if the tax rate for the value bands – also subject to changes under the bills previous guise – was part of discussions.
But Mavrou said that “the average household” would not be impacted as they fall under the tax threshold.
The CPI provision had drawn a large reaction from landowners, property developers and hoteliers who said the changes would drive the economy deeper into recession.
Under the changes as they were tabled for discussion under the bailout agreement, the taxable figure –levied on the total value of all properties in a person’s or company’s name – would be the result of multiplying the 1980 value of the property by about 3.5.
A property worth €170,000 in 1980 values would have risen to €595,000 after multiplying it with the CPI. The chairman of property developers Pantelis Leptos said it was an unfair bill that would act as a deterrent for investment.
The hotels association PASYXE chairman, Haris Loizides, said that the bill as it stood increased the tax a hotel had to pay by nine times, which would have translated to a hotel that paid €27,600 in IPT last year needing to pay €253,380 in 2013.