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Cyprus Property

Georgiades expects lawmakers to reform public wage bill after scrapping IPT

Finance minister Harris Georgiades said that he does not expect the discount on immovable property tax and its abolishment next year to upset the government’s budget plans, while not reforming the public wage bill could do so, and urged lawmakers to support a bundle of government draft bills.

“I hope that in September these reform bills on the reform of the public service will be approved in order to ensure that there will never again have a fiscal derailment and instead maintain the positive prospects for our economy,” Georgiades told reporters in Nicosia on Friday, according to a document emailed by the finance ministry. “It would make me feel more comfortable if the parliament’s decision (to slash and abolish the property tax) was combined with the approval of the bill regulating and setting a cap on public wage bill, linking it to the upwards performance of the economy. Otherwise, from January 1, 2017, existing legislation provides that we will revert to the old practices which included no cap on pay rises, incremental rises, hiring, and related allowances”.

The parliament’s vote on the immovable property tax on Thursday, which was based on a proposal of DISY and accompanied by a 50 per cent slashing of property transfer fees, will reduce the government’s revenue to €45m this year, which it will completely lose in 2017, compared to €100m in 2015 and €120m in 2013, the finance minister said. The government is expected to lose an additional €80m in revenue when at the end of this year an extraordinary contribution on salaries phases out, he added.

The parliament’s decision concerns only the immovable property tax paid to the central government. A similar tax, which generates a total of €30m in revenue for the local administration, which the government had proposed abolishing, remains in place.

The government initially proposed to collect a total of €45m from a unified property tax to eliminate bureaucratic procedures bothersome to the citizens, based on 2013 property values, which the parliament declined insisting on calculating the amounts due based on 1980 prices, Georgiades added.

“Prudent fiscal management and a virtually balanced budget allows today putting forward a very important tax relief for households and companies,” the minister said, reminding that Cyprus had to resort to tax hikes over the past years to deal with the consequences of budget shortfalls.

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