The hypocrisy of our political system in all its glory:
With regard to the public debate that has been going on in recent days, on the occasion of the Auditor General's report, I clarify the following:
[*]In 2016, and while the CCP was in full implementation with the economic conditions of its operation well known, the House of Representatives, with its own proposal for a law which is still in force today, citing the European Directive which allows a reduced VAT rate for the acquisition of housing for "social purposes" and without any government initiative, decided to impose a reduced rate from 19% to 5% on the first 200 t.m. of a dwelling used as a permanent residence and place of residence in the Republic. The Proposed Law was passed UNANIMOUSLY (except for the Ecologists) without any mention or even consideration of an exemption in the CCP.
[*]This legislation made eligible ALL those who declared the residence as their main and permanent residence in the Republic WITHOUT ANY EXCEPTION. Regardless of socio-economic data, income, size or value of home, or whether the purchase was made under the CCP. In particular, when the Bill was passed by the House of Representatives in 2016 there was a clear statement from an opposition party MP who said: "We are conscious that by passing what we are passing, we will get rid of taxes and palaces. That is what will happen. And palaces of five hundred square metres of super luxury. That's what will happen." [*]The implementation of this legislation has benefited Cypriot citizens (wealthy and middle class) as well as European and third country citizens (including naturalized citizens) and land developers. [*]VAT on the residences of naturalized persons, if their permanent residence and place of stay was in the Republic, was correctly imposed on the basis of the provisions of the legislation passed by the House of Representatives in 2016. There was no loss of revenue from the implementation of the legislation. Loss of revenue, much more than what the Auditor General alleges, may have resulted from the change in the legislation which was a political decision by the House of Representatives that falls outside the scope of the Auditor General's audit. [*]With regard to the GA's position that the Department of Taxation should not have granted the reduced VAT rate for applications for exceptional naturalisations, the Department applied and applies the 2016 Law to any citizen of Cyprus or another state who used residence as a permanent place of residence in the Republic. The CCP made it a condition that the applicant must own and occupy a permanent residence in the Republic of Cyprus and distinguished between the purchase of a permanent residence and an investment in residential units. The reduced VAT rate of 5% was granted to naturalized persons as well as to any Cypriot citizen on the basis of a declaration that the residence is used as a principal and permanent place of residence in the Republic. Once the residence is completed and the applicant is settled, only then can the applicant's original declaration be verified by the Tax Department. If during the re-examination it is found that the dwelling was rented or used for purposes other than owner-occupation, as provided for in the VAT legislation, then, as for any other applicant, VAT is recovered. Already the Ministry of Finance has requested and received since last August (2021) from providers a significant number of applications that have taken advantage of the reduced VAT rate and has forwarded the data to the Department of Taxation for reassessment. The Tax Department is already carrying out the relevant checks and where it is found that the applicant is not a beneficiary, the VAT amount is recovered and the case will be forwarded to the Home Office for its own action, as has already happened in some cases.
[*]In 2021, following an intervention by an opposition MEP, (and party that voted for the 2016 legislation), on the implementation of the European VAT Directive concerning the application of the reduced rate of 5% in Cyprus, he made a report to the CCP for political expediency. The European Commission, making explicit reference to the complaint and the 2016 Law, initiated an infringement procedure against Cyprus which is ongoing. The reference by the Auditor General and political parties to "wealthy citizens" refers to their political decision to vote for the legislation in question and not the provisions of the CCP.
[*]After consultation with the ETEC and other stakeholders, the Ministry of Finance submitted a Bill to the House of Representatives, which is in line with the acquis communautaire on VAT and aims to bring the Republic of Cyprus into compliance with an infringement letter sent by the EU. This bill establishes, on the basis of statistical data, a specific floor area of dwellings that can benefit, and adopts favourable provisions for disabled persons. In other words, the submitted bill introduces criteria that give the measure a social character. Middle-class Cypriots, whom the Commission does not consider to be covered by the strict provisions of the European VAT Directive for 'social purposes', will undoubtedly be affected by this new bill. [*]Unfortunately, since the tabling of the bill last January, the House of Representatives, under various pretexts, such as allegedly depriving young couples of their right and the hit to the construction industry, has not proceeded to promote and vote on this bill. [*]The bill, which repeals the previous regime, which has been abused as documented by the GM in his report, has yet to be passed by the House of Representatives unlike the 2016 legislation that created the abuse and was passed with great ease. [BR]
Both the Government and I personally have admitted weaknesses, gaps and shortcomings of the CCP, a Program that was implemented and helped at a particularly critical time when the economy and the banking system were in danger of collapse. We have addressed these shortcomings by taking continuous corrective measures, such as strengthening due diligence controls, which is also highlighted in the Nicolatos Commission's findings. However, the attempt to politically exploit provisions of the Programme, two years after its abolition, provisions that were well known and accepted throughout the years of its implementation, such as the imposition of a reduced VAT rate and the naturalisation of relatives or managers of major projects worth hundreds of millions of euros (even though they may not have been done on the correct legal basis) is nothing but political hypocrisy.
(EK/SX)
Contents of this article including associated images are owned by PIO
Views & opinions expressed are those of the author and/or PIO
Source
