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Political storm over property tax

Ruling DISY chief Averof Neophytou was roundly panned on Tuesday over a proposal he sprang a day earlier to scrap the Immovable Property Tax (IPT).

On Monday Neophytou threw a spanner in the works, when during a parliamentary discussion of the government’s new IPT legislation, he suggested doing away with the tax altogether and making up for the loss of revenues to the state by trimming extraneous expenditures – such as multiple pensions for state officials.

As expected, it caused a political storm.

The government is proposing a flat IPT rate on all properties. All opposition parties are against, arguing that a flat rate benefits wealthy large landowners. Whereas the opposition are united in counter-proposing a staggered IPT rate, they differ on the details. DISY was alone in supporting the government proposal – until Neophytou floated the outright elimination of IPT.

“Sour grapes. Realising he was outnumbered and that he wasn’t getting what he wanted, Mr Neophytou thought he could outmanoeuvre us with this caper,” commented AKEL leader Andros Kyprianou.

In a statement, AKEL accused Neophytou of populist tactics, correctly observing that the DISY boss had failed to back up his drastic proposal with numbers.

Even Finance Minister Harris Georgiades – who was present in parliament when Neophytou landed the IPT bombshell – seemed taken aback.

“I did not expect it,” Georgiades told the public broadcaster on Tuesday.

The minister noted that no single politician can alone decide to slash government expenditures as an offset to abolishing a tax, adding that such decisions must be taken collectively at the House plenum.

Neither were the opposition parties’ proposals helpful, added Georgiades, complaining that they wanted to tinker with the government legislation so that in the end it would become unrecognisable.

This was no time to experiment with public finances or to risk deficits, the minister warned.

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.

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

Although DISY’s Neophytou did not unveil the specifics of his own proposal to scrap IPT – he has promised to do so when parliament next revisits the matter this Friday – it reportedly entails restricting multiple pensions given out to state officials, as well as reducing the number of police officers seconded as bodyguards to senior state officials, and reining in taxpayer-funded travels abroad.

But in October 2014, the Supreme Court handed down a ruling on the multiple pensions of high-ranking state officials. The court said pensions should be considered as private property and are thus protected under the constitution.

Neophytou’s pitch was sure to make waves, coming at a time when civil servants are precisely making noises about recouping wage cuts imposed since 2012.

Chiming in, Glafcos Hadjipetrou, head of the civil servants union PASYDY, said any calls for civil servants to take a hit now are reprehensible.

If the state does not respect the terms of contract of its employees, how could the private sector be expected to do the same, he mused.

“It saddens us to hear politicians questioning salaries and pensions, questioning everything in order to achieve their own goals, by discounting the contribution of the public sector.”

Amid the kerfuffle, the government’s IPT legislation is set to be tabled for a vote at the plenum on July 14. It’s understood that voting on the other part of the government proposal – a 19 per cent VAT on land sales for commercial property transactions – will be postponed to September, despite the administration warning that it is a matter of urgent compliance with EU directives.

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.

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.

 

 



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