Draft legislation by MPs threatens the fight for clarity over the sources of wealth of politically exposed persons
You have probably heard that, in the past week, effectively all the presidential candidates have undertaken a firm commitment to implement, as from January 1, 2023, the Pissarides-Panayiotides-Syrimis proposal impacting all politically exposed persons on “pothen esches” – where have the funds come from? – and have signed a public declaration to that effect.
As I have explained on numerous occasions in the past, the essence of “pothen esches” is the following simple mathematical equation: net wealth at the beginning of the calendar year, plus declared annual income, less annual living expenses equal net wealth at the end of the calendar year. The idea is that this equation must be set out in euros and must be confirmed as correct in a declaration that each politically exposed person must file, every year, by a predefined deadline.
So, you can imagine my surprise and amazement when I heard, a few days ago, that a number of lawmakers are seeking to push through parliament various amendments to the law that substantially ignore the recommendations of the Pissarides-Panayiotides-Syrimis ad hoc committee. These amendments not only do not aim at combating corruption, but in fact they will foster such practices by perpetuating the ineffectiveness of the legislation that has been in existence since 2004.
In response to these developments, the authors of the white paper on “pothen esches”, namely Sir Christopher Pissarides, the Noble Prize-winner economist, Nicos Syrimis, a highly respected certified public accountant and myself, also a CPA, sent on Friday a letter to the president of the Cyprus parliament and to the chair and relevant House of Representatives committee dealing with the aforementioned amendments, highlighting some of the loopholes that will lead to the perpetuation of corruption in Cyprus. The membership of the House committee is the following: Demetris Demetriou, Georgios Karoullas, Nikos Georgiou, Andreas Pasiourtides, Irene Charalambides, Nikos Kettiros, Pavlos Mylonas, Zacharias Koulias, Andreas Themistocleous, Marinos Mousiouttas and Alexandra Attalides.
The following provisions of the draft legislation are typical examples of the numerous obstacles, which, if legislated, will shield and protect the perpetrators of illegal and questionable acts.
The assets and the liabilities must be reported ‘at cost’
The acquisition cost of an asset is the value at which the asset must be reported, and NOT its current market value, which has no bearing – none whatsoever – on the quantification of the income that the politically exposed persons must have had in order to justify the increase of their net wealth and that of their spouse and underage children, after allowing for the living expenses of their family. The reporting of the current market value (beyond the fact that it is a very difficult task, which serves no purpose) inevitably results in “blurring the picture”. It is analogous to counting apples with potatoes.
The wealth statements must be compiled and filed annually
The pothen esches returns must be compiled on an annual basis and they must be “bridged” to the tax returns filed by the politically exposed persons. As I have explained above, this is the essence of these returns. A failure to bridge the increase or decrease of the net wealth in a given year with the income generated in that year inevitably results in a futile and ineffective exercise, which aims at pulling the wool over the eyes of the public. This has been happening over the past 18 years, ever since the first enactment of the “pothen esches” legislation.
MPs cannot police themselves
The bill, which has been tabled and is in the process of being enacted, provides that the pothen esches system will be managed by those whose economic activities the system is meant to monitor. In other words, what is being proposing is a “self-service” system that will probably be undermined by those it intends to control and punish. Such proposals cannot be seen as a serious attempt to fight corruption, particularly after what Al Jazeera and other journalists uncovered. There is no doubt that the system will NOT serve its purpose, if its management remains in the hands of those who are the target of the controls. It is truly surprising that this evident truth has been systematically overlooked by those who have been empowered by the public to legislate. Only if the task of managing the pothen esches system is placed in the hands of a truly independent authority, can we hope that things will move in the right direction.
The pothen esches returns cannot be subjected to the examination that is being proposed in the draft bill, for the very reasons that have been explained in the past by the statutory auditors themselves, whose work is governed by the International Auditing Standards. In addition, the “audits” advocated under the draft legislation, entail a significant financial burden which cannot be authorised in a bill that has not been proposed by the government.
The bill does not allow publication of wealth statements
It is well-known that the most effective control mechanism that will secure the proper functioning of the pothen esches process is the public scrutiny of the information contained in the wealth statements by the people who pay the consequences of corruption and collusion. To date, this price has been very heavy; its consequences were not merely financial but also political, such as the global defamation of Cyprus.
Most people know that the public disclosure of personal data is legally permissible under EU legislation, if the disclosure is stipulated in a specific legislative act, it serves the public interest and, in particular, if it aims at combating corruption and collusion. It follows that the claim that the public disclosure of the contents of the wealth statements filed by politically exposed persons is not feasible because it constitutes a violation of EU law is NOT true. However, it should be remembered that such a disclosure must be explained and justified in the law that prescribes the disclosure, because, otherwise, the law will be declared unconstitutional on technical grounds (for failing to explain why the disclosure is required). This is, indeed, what has happened in the past.
My opinion, which is shared by Sir Christopher Pissarides and Nicos Syrimis and effectively by all the candidates who aspire to become presidents, the time has come to put an end to the corrupt practices that have caused numerous national disasters. Our lawmakers must respond to the challenge.
Christos Panayiotides is a regular columnist for the Sunday Mail and Alithia
