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Our View: New tax evasion bill overdue, but system still unfair

Why it has taken more than two decades to put the punishment for non-payment of income tax on a par with that for non-payment of VAT?

THE council of ministers has approved a law amendment that is set to make income tax collection more effective. The decision, announced after Wednesday’s cabinet meeting by Finance Minister Harris Georgiades, will tighten the law relating to income declarations and make the failure to pay confirmed income tax due to the state a criminal offence.

Nobody can criticise the government for taking measures to improve its income tax collection capability. If any criticism is deserved it is over the failure of successive governments to make individuals’ failure to pay confirmed income tax dues a criminal offence, as has been the case with VAT since its introduction in the early nineties.

Why it has taken more than two decades to put the punishment for non-payment of income tax on a par with that for non-payment of VAT, especially after the successful operation of the latter, nobody knows. Perhaps it was because VAT applied to legal entities and politicians did not want to be as harsh on individuals avoiding paying their income tax dues, even though the inadequate punishment probably explains the ineffectiveness of income tax collection.

This should change now, assuming the political parties approve the amendment to the law. While clamping down on tax evaders is a good move, the state should also encourage individuals to pay their dues by ensuring fairness within the system, something that does not exist at present. For instance, deputies are paid half their income as an ‘allowance’ of some type, thus exempting them from paying any tax on it. They are also paid a host of other expenses, including secretarial services that few, if any, use, that are not taxed.

It is a grossly unfair tax system that does not treat all citizens equally and the worst thing is that this unequal treatment is a state policy. On what moral or economic grounds can a small class of citizens be exempt from taxation for allowances paid to them while for everyone else similar allowances are fully taxed? More recently, the head of the Inland Revenue Department announced that employees of a bank that took the compensation package offered for voluntary retirement would pay no tax. Why? The amount that for some could be as much as €200,000 represents two or more years’ annual salaries, so why is this tax exempt?

Such blatant cases of preferential treatment for deputies, bank employees and semi-governmental workers by the tax authorities has no place in a country which wants to make failure to pay income tax a criminal offence. In the case of VAT, non-payment of which is a criminal offence, all companies are treated in the same way and there are no exemptions for anyone. How can the non-payment of confirmed income tax on time be a criminal offence when some individuals are arbitrarily exempted from paying tax on some of their income?

 

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