Cyprus Mail
CM Regular Columnist

From tax haven to tax hell

By Hermes Solomon

THE poor grow poorer while the filthy rich grow filthily richer.

A 2012 report from the US Tax Justice Network estimated that twice (it could well be three times) the US deficit of 17 trillion dollars is deposited in tax havens of which there are 70 worldwide, Cyprus listed among them.

Hiding wealth within tax havens via trusts devised by specialist tax consultancy firms/banks, which obscure the names of beneficiaries, should be internationally outlawed.

You’d think it would be easy to accomplish if only governments and tax authorities would combine like the Untouchables to weed out the filth.

Cyprus is renowned for its disproportionate number of accountants and tax consultants. It was they who built Cyprus into a tax haven envied by many, in particular the US, Russia, Germany, France, Britain and Holland, their combined envy leading to the bail-in followed by the disastrously successful destruction of Cyprus’ financial sector.

Which bank is spotlessly clean; certainly not the FBME, which the envious seek to close down and direct FBME deposits of €1.8 billion to the ‘now cleaner’ Bank of Cyprus?

Lloyds, UBS, Barclays, Deutsche Bank, HSBC and RBS are all numbered among banks found guilty of serious financial misdemeanours, but have not been closed down. And wasn’t it the criminal shenanigans of defunct US banks, Lehmann Bros and Bear Stearns that brought the stock market to its knees in 2008?

It’s no wonder public finances are in such a mess and taxation crippling for SME’s and individuals given the unimaginable wealth of un-taxed deposits sitting in tax havens!

When will relevant tax authorities oblige the 500 corporations, thousands of celebrities (sportsmen, actors, bankers, nerds, etc.) to declare their true and total income in its country of origin and pay rightfully owed taxes therein?

For the past ten years western governments have been calling for change, but little has ensued other than the US forcing Swiss banks, the powerhouse of ‘illicit’ world wealth, to submit the names of all US citizens/corporations holding Swiss numbered accounts.

But EU tax authorities have yet to accomplish this simple task. Many claim that corporation lobbyists have their hands in the pant pockets of EU lawmakers and it is they (drug companies, energy giants, industrialists, banks et al) which rule the roost.

‘Exchange of Information’ between financial institutions and EU member state tax authorities is obligatory. On the other hand, tax havens are not obliged to exchange information with any tax authority. And therein lays the conundrum –obfuscation.

Am I bitter about this state of worldwide financial affairs? Well, I am now after receiving a 2008 tax demand via registered letter only last week, having faithfully submitted accurate and honest (more fool me I hear many say) income tax returns on time ever since I registered to pay income tax in Cyprus.

And just why did it take the Inland Revenue six years to assess my 2008 returns in English stating there was nothing to pay, followed three weeks later by a registered letter tax demand in Greek? Both documents dated 11/06/2014 and stamped by the same Chief Revenue Officer.

In Cyprus, tax-free interest earned offshore/onshore must be declared and tax (defence now charged at 30 per cent) paid on that interest within a further six months else penalties will accrue.

I don’t mind paying tax due, but begrudge the late payment penalty of 30 per cent that was unjustly added to the 2008 demand when I arrived at the Nicosia Tax Payment Office – penalties climbing exponentially if taxes are hugely overdue.

When I complained about the revenue’s tardiness to assess my returns, (hello, is anybody there) the payment officer dug out a circular, crossed the appropriate paragraph then shoved it under the window. ‘Payment on time of tax due is your responsibility!’So what the hell are assessors doing for a living?

And there you have it; an archaically unfair tax system. Either employ an accountant or run around tax offices gathering information and requisite forms (which can also be found online at Cyprus Inland Revenue Department).

The alternative is shock horror belated tax (defence) demands and accrued penalties, which if left unpaid lead you into court.

In just two years this tax haven heaven has become a tax hell.

It galls me to think that those ‘in power’ hid their hoards in tax havens abroad well before the 2013 bail-in; many even transferring loot during the two week supposed bank lock-down!

It is estimated that if all tax haven wealth had been correctly declared for tax purposes, many debtor nations (PIGS plus Cyprus) would be creditor nations.

Government coffers are empty and the Inland Revenue has finally woken up.

Let’s hope they go for the ‘big boys’ as well! But they won’t.

It’ll be the same story as it is with NPL’s; hit the small man and leave the ‘big boys’ alone.

Banking restrictions here bring to mind Devil’s Island, many seeking a way out from these loan shark infested waters.

You came into this world with nothing, and most ex-pats into Cyprus with money.

Many have already left. And many more, if they could only sell their homes, would follow.

But before you are permitted to complete the sale of your home, the Inland Revenue will scrutinise all tax returns/assets liable to capital gains tax, backdating searches ten years then charge crippling penalties for late payment of tax due. And as for probate – well, let’s not go there!

“Ask and it will be given; seek and you will find; knock and the door will be opened.” Matthew 7:7.

I would like to thank the audit dept. at the firm of M.Z. Makrides & Co. and Mr Christodoulos Karolides at the Inland Revenue, who between them promptly resolved my 2009 to 2014 tax affairs. I am now free to either leave Cyprus or die with a tax free clear conscience.

But where to next, Belize, Panama, heaven or hell; all four are tax havens which have yet to default!

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