Cyprus Mail
CM Regular Columnist

Tax evasion and its protectors in high places

Former finance minister Michalis Sarris

By Loucas Charalambous

On July 1 President Anastasiades announced that the cabinet had just approved “sweeping tax reforms”. Speaking on the same day before a certified public accountants congress, the president noted that “this concerns a structural change which will significantly benefit individuals and businesses and will help to better clamp down on tax evasion and tax avoidance.” Four months on, this “tax reform” is nowhere to be seen.

The need to tackle tax evasion is a highly popular topic among all the parties as they engage in their typical demagoguery. No doubt there are great numbers of people on fat incomes who don’t pay their taxes, and the state is tragically reluctant to deal with them.

For illustrative purposes, I mention only doctors and physiotherapists working out of their own offices or in private clinics. What we have here is a mindboggling, unfathomable orgy of tax evasion.

A patient is admitted to a private hospital or clinic, stays there for 24 or 48 hours, is monitored and then released.

Before the patient leaves, the doctor monitoring the patient (usually two to three visits to the room, each lasting but a few minutes) advises the latter to pass by the accounting office to settle the hospital bill, and to then come by the doctor’s office to pay the doctor’s fees.

Once at the doctor’s office (or his secretary), the patient nearly faints on looking at the bill. Usually, for a stay of one day or two, the doctor’s fee will range from €400 to €700, more if the patient stayed longer. From personal experience and talking with several friends and relatives, I’ve worked out that many doctors at private hospitals make anywhere from €60,000 to €100,000 a month. Naturally, they issue no receipt for their fees and they refuse payment by cheque or credit card. They accept only cash. And, to “facilitate” their patients, they’ve installed ATMs inside the hospitals.

Physiotherapists are no different. Insurance companies – just to give you a sampling of the problem – are daily inundated with certificates for dozens of physiotherapy treatments (most of them fake) which were supposedly administered to accident victims. Typically the charges are €500, €600 or €800, and these are simply indicated on the bottom part of the “certificate”. No invoice, no receipt. And when they are asked to one, they send over a phoney invoice from those blocks you can get from kiosks and bookstores, on which they write their own name. No tax identity code, no VAT number, apart from very few exceptions.

I am certain that should the tax commissioner investigate, he will find that many of these people do not even have a tax file. Of course, it is not just the doctors and the physiotherapists: it is lawyers, architects, plumbers, electricians and a host of others who are big-time tax evaders.

I have no doubt that if the state was able to properly collect income tax, Cyprus would not have gone bankrupt, even given the incredible waste in throwing money down that black hole that is the civil service. But how can the state collect when the politicians themselves are in the way, when they are essentially shielding the tax evaders?

Take one example: on January 25, 2007, the then finance minister Michalis Sarris told daily Phileleftheros that the Papadopoulos government was about to forward to parliament amendments to tax legislation, making it an offence both for payees not to issue invoices and receipts as well as for payers not to demand a receipt. This is a practice implemented by European Union countries.

On the evening of the same day, state broadcaster CyBC cited comments by AKEL’s Andros Kyprianou, DISY’s Averof Neophytou, Antigone Papadopoulou (DIKO) and EDEK’s Yiannakis Omirou. All four were livid with the finance minister, barely stopping short of cussing him.

“We shall not allow Cyprus to become a police state,” they declared in unison, as if they had all rehearsed their lines together. Needless to say, that spelled the end of that piece of legislation.

Thus, here in Cyprus tax evasion has protectors in high places. And politicians are at the forefront. Obviously, in shielding the tax evaders they are protecting their own interests. These are the same politicians who waste no chance to moralise about tax evasion and complain about the state not cracking down on tax cheats. This, then, is yet another example of the filth permeating our corrupt political establishment.

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