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Provident funds look set to be exempted from Gesy payments

The Health Insurance Organisation (HIO) said on Tuesday it is open to the proposal to exempt provident funds from contributing to the national health scheme, known as Gesy.

In parliament, MPs said a number of people have come forward with concerns that their provident funds may be tapped to provide a source of financing for Gesy, thus reducing their payouts on retirement.
As it stands, the legislation on Gesy does not explicitly exempt provident funds from contributing to the scheme.

Lawmakers said the HIO, the body which will manage Gesy, would be a given a month to formalise the decision to exempt provident funds. Once that is done, the ministry of health would draft relevant legislation.

Chair of the House labour committee Andreas Fakondis said the proposal is to exempt both the contributions of employees as well as employers to provident funds.

For his part, acting director of the HIO Andreas Papaconstandinou said the going definition of taxable earnings, for the purposes of funding Gesy, does not exclude these contributions.

As it stands, the Gesy legislation provides for all contributions to the scheme to begin on March 1 this year. The law states that the provident fund contributions to be taxed for Gesy, will be only those amounts accrued after March 1.

For example, said Papaconstandinou, if someone has worked for 400 months and retires on April 1 this year, that person’s provident fund payout will be taxed for Gesy only for the one month – March 1 to April 1.

This arrangement, he added, now affords authorities and parliament the leeway to amend the Gesy legislation – exempting provident funds – before the contributions kick in.

“People should not panic, because in any case they won’t be taxed for the entire amount [contributions] for which they worked to date. For the time being, the taxable amount will be very small, but will increase as time passes. So parliament has time to revisit the matter.”

The finance ministry likewise appeared to be on board. An official said that exempting provident funds from being taxed would not pose financing problems to Gesy, since the budget calculations had not relied on provident funds in the first place.

The government’s obliging position to exempt provident funds is likely a concession to keep the momentum going for the much-maligned Gesy. The first phase of the national health scheme is to be rolled out in June with free primary healthcare.

However, questions persist as to whether the annual budget for the scheme, about €1bn, will be sufficient to cover all the expenses.

By some estimates, the budgeted funding for Gesy may be as much as €300m short of the scheme’s real needs.

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