Cyprus Mail
Cyprus

VAT and IRD to merge into single tax body

By George Psyllides

THE GOVERNMENT has decided to go ahead with the immediate creation of a single tax authority as part of structural changes aimed at streamlining public administration, it was announced yesterday.
The task entails integrating the VAT service with the Inland Revenue Department (IRD), but also strengthening the legal framework, simplifying procedures and optimising IT systems, the finance ministry said.

The plan is currently being discussed with an International Monetary Fund team that provides technical support and know-how.

The final draft is expected to be submitted to the cabinet for approval sometime next month, the ministry said.

The new department will make procedures easier “and will have a positive impact on state revenues, mainly through the fairer distribution of tax burdens,” it said.

According to the terms of an international bailout, Cyprus must “reform the revenue administration with the objective to reinforce the efficiency and effectiveness of revenue collection capacity and the fight against tax fraud and evasion, with a view to increasing fiscal revenue.”

The reforms include a programme of short-term measures to enhance compliance, efficiency and effectiveness as well as a comprehensive long-term reform covering risk management and the establishment of a new integrated function-based tax administration structure, integrating the existing IRD and VAT services.

Short-term measures, to be in place by the end of this year, include enacting legislation to enhance tax collection and voluntary compliance by attributing personal responsibility for payment of company taxes, harmonising legislation among tax types so that not paying taxes is a criminal offense, and strengthening powers by the tax authorities to ensure payment of outstanding tax obligations, by having for example, the authority to seize corporate assets, and prohibiting alienation or use of assets, including property and bank accounts, by the taxpayer.

Cypriot authorities must also pass legislation to establish self-assessment for all income taxpayers by changing from a pre-assessment verification of income tax returns to post-assessment audits selected on the basis of risk and decide on a joint audit programme for large taxpayers, to be conducted in 2014.

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