Opposition parties cried foul on Wednesday over a law concerning tax breaks brought in to kick start Cyprus as a foreign film location – dubbed Olivewood.
The law was rejected by the president and sent back to parliament only for MPs to discover that it contained an unconstitutional provision when it was originally submitted by the administration as a bill.
The bill, which amended the income tax law, concerns state incentives to the audiovisual industry which parliament approved on November 2.
At the time, parliament added a provision that included natural persons in the eligible parties, and not just companies.
President Nicos Anastasiades refused to sign the law, arguing that parliament had widened the scope of the amendment, which was a basic element in the provision of tax breaks.
However, as a second reason, the president said the retroactive nature of the bill was unconstitutional.
“In the form it was voted, but also the form it had been submitted by the executive, the bill provided for coming into force retroactively on January 1, 2018,” the president said in a letter to parliament.
He went on to say that this could not be done since the plan must be published and implemented after its approval for future investment and not those that may have been done before.
State aid watchdog Theophanis Theophanous and the Legal Service told MPs on Wednesday that the law violated EU regulations and was unconstitutional.
Theophanous said its retroactive provision took away the incentive character since there must be a plan in place for a company to apply for a rebate and not vice versa.
Members of the House finance committee were left wondering whether the Legal Service had failed to spot the offending provision or if the government didn’t care.
Akel spokesman Stephanos Stephanou suggested there were other motives behind the government’s decision to only include companies and make the bill retroactive.
Green party MP Giorgos Perdikis described the matter as a “big scandal” that was discovered by accident.
“To serve certain people, it appears the government brought a bill that parliament wrongly accepted, with retroactive effect to cover crony projects after the fact. It is a huge scam that we will not support.”
Finance ministry official Giorgos Panteli denied he had misled parliament into thinking natural persons were allowed tax breaks.
“A natural person cannot claim investment incentives. A natural person cannot claim these rebates because of our tax system,” he said.
Parliament has 15 days to decide whether it would accept the president’s referral or send it back. In that case the president will have to ask the supreme court to decide.