SOMETIMES the logic of politicians is impossible to fathom, such as the legislative changes to be discussed and voted by the Cyprus parliament by July that will reward bad borrowers who are unable/unwilling to pay their debts by offering them tax relief.
Four bills are up for discussion to incentivise borrowers who wish to sell their house as part of restructuring their debt with a bank or to settle a non-performing loan (NPL), reports the Cyprus Mail.
Under the proposals these ‘bad borrowers’ be exempted from paying income tax, capital gains tax, stamp duty and the special defence contribution.
A fifth bill, if passed, will exempt those who wish to sell their property to restructure their debt or settle their non-performing loan from paying Property Transfer Fees.
The proposals will also cover cases where borrowers sell their house on the free market, according to the co-author of the bills Disy MP Averof Neophytou.
Neophytou’s reasoning is that ‘bad borrowers’ will be able to sell their property on the open market at a higher price, as a bank will use the ‘forced sale value’ of a property when it carries out in a debt-for-asset swap; a property’s forced sale value is significantly lower than its market value.
It seems that the bills have the support of all political parties, the Finance Ministry and the Association of Cyprus Banks.
I’m certain that ‘bad borrowers’ will applaud the news that they will be offered tax breaks and other incentives.
And I’m equally certain that ‘good borrowers’, who continue to maintain their loan repayments in the face of financial difficulties will not be amused.
However, this will send a signal to many of the ‘good borrowers’ to default on their loans to take advantage of the incentives being offered to ‘bad borrowers’.