NEW government legislation grants the taxman sweeping powers, including the seizure of tax debtors’ bank accounts and assets as well as prohibiting the sale of real estate while a person is in arrears.
The bill, amending the core tax law of 1962, has been submitted to parliament, and its passage is a precondition for the release of the next bailout tranche by Cyprus’ international lenders.
Under its provisions, the director of the Inland Revenue Department (IRD) is empowered, having first secured a written consent from the Attorney-general, to request banks to freeze an amount in the holder’s account corresponding to what the person owes in taxes, including interest and late penalty fees. The frozen amount will be transferred to tax authorities.
A person has the right to appeal the action, in which case the IRD director must decide on the appeal within 15 days. Alternatively, an individual may take to the courts to have their frozen funds released.
The IRD – which by law has been merged with the VAT service – will also be able to order the confiscation of a person’s movable property, without going through the courts system, although a taxpayer may still legally challenge the seizure.
Currently the courts may, at the request of the IRD, summon before them tax debtors, investigate their financial means and possessions and order them to pay the amount in arrears. If debtors disregard the court order, the court may order the seizure and sale of their movable property, such as cars, furniture, etc.
Moreover, under the new legislation the IRD can now place a lien (legal claim) on a tax debtor’s tax debtors’ bank accounts without the prior need to secure a court order.
The action relates to tax arrears that are considered both final and recoverable, with the courts having no say on whether the amount owed to is fair or not.
Under this clause, the IRD director instructs the Department of Lands and Surveys to place a lien on a person’s immovable property as security for owed taxes that are final and recoverable. Once a property is in lien, the owner cannot alienate (sell or transfer) the property until the tax debt is settled.
The property may then be seized and sold to recover the amount due.
A person may appeal the move to have his or her property registered as lien, in which case the IRD director must within 15 days decide on the appeal.
Alternatively the affected person may apply to the court to have the lien registration lifted.
As the law now stands, prior to its amendment, only the courts may order the blocking, seizure and sale of immovable property.
It is not entirely clear whether mortgages and sales documents already filed with the land registry will be exempted.
The bill aims to strengthen powers by the tax authorities to ensure payment of outstanding tax obligations. It is set to be discussed at the House finance committee on Monday, where MPs will offer their final remarks, with the aim of bringing the bill to the plenum for a vote on Thursday.
Around €605 million in overdue taxes was owed to the state in 2012, with over half concerning unpaid income tax.