Cyprus Mail

Deepening divisions over IPT (Updated)


The parties’ public relations departments sparred verbally throughout Monday as it became apparent that politicians were nowhere near consensus regarding the new immovable property tax (IPT) regime proposed by the government.

The new IPT legislation tabled by the government was discussed again at a joint session of the House finance and interior affairs committees, in the presence of Finance Minister Harris Georgiades. While the session was still ongoing, each party – bar extreme right-wing ELAM – was releasing its own statement stating how it thought the new IPT should be structured.

The government has proposed introducing a flat IPT rate of 0.05 per cent and scrapping the IPT paid to local authorities altogether.

The flat rate will be levied on property values updated in 2013. To date, IPT is calculated on 1980s values, excluding many properties because they did not exist at the time. Rates differ depending on the value.

IPT revenues will be used to fund local authorities which stand to lose considerable income by the decision to scrap their IPT.

According to the finance ministry, owners of immovable property worth up to €50,000 would not be required to pay any tax.

Exempted from paying are the small owners with an IPT of up to €25. This would exempt some 65,000, or 17.5 per cent of property owners.

But opposition parties argue that a flat rate will benefit large landowners and the wealthy. They want to keep the current staggered rate, but tweak it, each floating their own ideas on how to do that.

The flat rate would fetch the state €45 million, or €58 million less than the €103 million in revenues estimated under the current taxation system.

At the same time the government plans to levy 19 per cent VAT on land sales for commercial property transactions only. The finance minister has said it is a matter of compliance with EU directives.

With the extra €24 million expected from the VAT on land sales, the government was hoping to limit the lost revenues from €58 million to €34 million.

Opposition parties say the benefit to taxpayers should be more equitably distributed among property owners, by setting higher rates on higher-value properties.

Ruling DISY leader and MP Averof Neophytou, whose party agrees with the government plan, threw a monkey wrench in the works on Monday when he proposed the scrapping of IPT altogether.

The state could then cut spending in other areas to compensate for this loss of revenue, he suggested.

Neophytou called for the House committees to reconvene on Friday, where DISY would advance the notion of abolishing extraneous benefits in the public sector.

“We shall recommend that the state be henceforth burdened with less inelastic spending, for example the multiple pensions and the pensions of €3,000 and €4,000 as well as many other things which provoke society and ordinary citizens.”

The proposal was awkwardly rebuffed by opposition parties, with AKEL suggesting it was only intended to benefit the rich and cut social spending.

Instead, AKEL MP Eleni Mavrou reiterated the communist party’s proposal for staggered rates. Smaller parties called for variations on this plan.

Even more awkwardly, Georgiades told reporters after the session that anyone proposing slashing the government’s income, without equivalent cuts in expenditure, was merely exhibiting “cheap bravado”.

“Cutting taxes, as various proposals I heard suggested, without at least proposing equal spending cuts, is not responsible,” the finance minister said.

And, in case the message had been lost on some, Georgiades zeroed in on his target on Twitter late on Monday.

“Responsible moves in tax policy: those who propose scrapping taxes while retaining high public spending are just being populist,” he tweeted.

Earlier, main opposition AKEL blasted the flat rate as a wealth-distribution ploy benefiting the rich.

Countering, DISY put out a statement accusing AKEL of obfuscation.

“IPT is not an income tax for it to be used in redistributing wealth,” the party said.

“Often, immovable property not only constitutes wealth, but rather is a part and a function of the productive process. So if AKEL wishes to over-tax the productive process, this would harm growth and, ultimately, the interests of working people. Besides, small properties are exempted anyway.”

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