The cabinet on Tuesday gave the nod to a bill for reform of local government designed to cut administrative costs through a clustering of services and a reduction in the payroll.
Interior minister Socrates Hasikos said he hoped parliament – once it reconvenes after the summer break – would pass the legislation well before the end of the year so that implementation can go ahead as soon as possible.
“This is an issue that has afflicted the Republic for many years. The bill has been vetted by the troika, it has been completely accepted, and is now headed to parliament.”
Overhaul of local administration is a condition stemming from Cyprus’ bailout agreement with international creditors. Cyprus is already behind schedule.
Hasikos said the proposed changes would generate savings that would then be used to provide better services for taxpayers.
“The other thing we will achieve through this bill is the clustering of services to citizens in a specific place, such as a district-level cluster, where town planning and building permits will be issued. In turn, the government shall provide its know-how to these new bodies issuing permits.”
Asked how many such clusters would emerge, the minister said the clusters would be geographical, that is on a district level, but did not rule out the subsequent creation of additional clusters should the need arise.
However the bill keeps intact the number of municipalities or municipal councils.
According to Hasikos, what will be reduced is the number of municipal councillors.
“So we will no longer have an army of councillors in each municipality and community. This will bring about significant savings,” he said.
Once local administration is reformed, the subsidy given by the state to local authorities will be abolished and they will undertake to collect property tax, now done by the government.
At the same time municipal property tax will be abolished and local authorities are to be compensated by €15m for 2015 to make up for their loss of income.
Hasikos said the revenue stream would make local administration authorities self-sustaining.
“Revenues from immovable property tax, more than €100m, essentially will enable them to become autonomous, which has been a long-standing demand.”
Parliament recently passed a series of tax reform bills designed to streamline the system. They included the reduction of transfer fees on real estate transactions by 50 per cent until the end of 2016 and the exemption from capital gains tax from the future sale of property, acquired until the end of 2016.