By Elias Hazou
DESPITE strong objections, lawmakers yesterday bowed to force majeure and gave the nod to government legislation establishing a single tax authority through the merger of the Inland Revenue Department (IRD) and the VAT service.
Passage of the legislation by June 5 was a condition set by Cyprus’ international lenders for the release of the fifth bailout tranche as part of structural changes aimed at streamlining public administration.
Under the terms of the 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.
The single tax authority will comprise a tax commissioner and deputy commissioners, to be hired on five-year contracts with an option for a five-year renewal.
The bone of contention revolved around the fact the appointments are to be made by the cabinet – an arrangement which opposition parties say will lead to political appointees kowtowing to the government of the day.
AKEL and DIKO protested that the legislation is in breach of norms as the procedure bypasses the Civil Service Commission, the body responsible for appointments in the public sector.
As a trade-off, the government agreed that the nominees must get final approval from parliament.
In addition the three positions are open to anyone from either the private or public sector. This clause now allows the current director of the IRD Giorgos Poufos to apply, as he had been excluded under the provisions of the bill as it was initially drafted.
The bill passed with 34 votes for from DISY, DIKO, EDEK and the Greens, with all 19 MPs from AKEL voting against. The Citizens Alliance abstained.
Also yesterday the plenum passed the regulations governing the operation of the Fiscal Council, whose establishment was another key condition for the release of the next bailout tranche.
The council will have three members with the power to recommend fines as well as jail time for offenders. The council will be responsible for overseeing the implementation of fiscal rules, analysing fiscal policy developments, and evaluating the macro-economic and fiscal forecasts prepared by the government.
Last month the cabinet named the three council members. They are Demetris Georgiades, Marios Zachariades and Alkis Loizides.
Opposition parties – AKEL in particular – found Georgiades’ appointment distasteful. Georgiades, financial news editor for daily Politis, is an advocate of free markets and small government, and frequently pens editorials derisive of MPs.