By George Psyllides
FIGHTING tax cheats is like fighting a bear with only a knife, the Inland Revenue chief said yesterday, urging the state to invest in his department, which lacks the staff and the tools to tackle the problem effectively.
Giorgos Poufos said his department would never be able to close the gap on tax cheats if it was not strengthened.
The department has lost one-third of its staff during the pas few years – through normal and early retirements – and its IT systems were dated, Poufos said.
“We are trying to do everything we can but it is not an easy thing to fight a bear with a knife,” he told state radio.
His comments came in the wake of the publication of the state auditor-general’s report, which suggested that some lawyers and doctors did not pay the taxes that reflected their lifestyles.
The auditor listed several cases concerning both professional groups were individuals were found to own property worth hundreds of thousands of euros while declaring low incomes.
The IRD chief it was easiest thing to go through a whole year searching for five or 10 people who have not filed their tax return.
The difficult job was closing the gap and that “needs tools, systems, programmes, automation and personnel.”
On Friday, Chrystalla Georghadji said she handed a list with the details of lawyers and doctors whose lifestyle did not match the declaration made to tax authorities. In some cases the individuals did not even have a tax file.
One case concerned a person, unknown to the IRD, who registered a car in their name in 2008 and in 2010 also registered real estate worth €119,602.
Another individual, also unknown to the IRD, had registered part of property whose total value was €265,000 in 2009, the report said.
The finance ministry said it had asked those individuals, and others, to file the necessary paperwork with the tax authorities.
There were also doctors who did not file their tax forms for one or more years but they were not taxed and no legal measures were taken against them.
In one case the individual who declared an income of around €28,000 per year for 2006 and 2007 had not filed a return between 2008 and 2011. In 2011, the man and his wife had registered real estate worth €530,520 in their name.
Another case concerned a couple, both doctors in Larnaca, who had failed to declare some €1.4 million in income for 2008 and 2009.
Poufos said the list included 50 or 60 names but warned that not all doctors and lawyers lived in luxury.
He added that the IRD had targeted those two particular sectors, along with a couple of others.
“We have imposed over €110 million in the past four years, representing additional tax on what had been declared,” Poufos said.
The government announced last month that it had decided to integrate the VAT service with the IRD, but also strengthening the legal framework, simplifying procedures and optimising IT systems.
Under the terms of its 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.