It is apparent that the authors of the legislation lacked the know-how necessary. As has happened in the past, omissions will lead to deadlocks
Recently, I had the opportunity to review an updated version of a bill on the proposed amendments to the long-suffering capital statements – pothen esches – of politically exposed persons, which has effectively remained dormant ever since it was first enacted 20 years ago, when Cyprus entered the European Union.
The positive aspects of this new state initiative are the following:
- The new preamble to the legislation act finally focuses on the essence of wealth statements and explains the need for publishing certain personal data of the politically exposed persons to prevent and combat state corruption. The absence of this justification was why the law was previously deemed unconstitutional and its provisions were effectively castrated. Certainly, there has been progress in this area.
- Also positive is the mandatory inclusion in the politically exposed persons (PEP) capital statements of the assets of spouses (including civil partners) and their underage children.
- Another a positive development is the computerisation of the wealth declarations, thus facilitating a mechanical check at the stage of filing and securing the minimum necessary uniformity and comparability between all the declarations filed. Unfortunately, the format and content of the declarations will be set in an appendix to the law, which has not been circulated to MPs who will vote on the bill.
Nevertheless, it is apparent from the other provisions of the updated pothen esches that the authors of the bill have not grasped their essence – the comparison of two consecutive wealth statements (at the beginning and at the end of each calendar year) and the “bridging” of the changes with the declared income and outlays (expenses) in the intervening year.
This bridging exercise must be undertaken by the person filing the wealth statements because only he/she has the necessary access to the relevant information and, by extension, has the ability to ensure that the declaration filed is correct in every material respect. Any other approach implies ignorance of the technical aspects of the process or a deliberate intention to undermine its effectiveness.
The lack of the necessary technical background by the authors of the “updated” pothen esches is readily apparent from the following provision: “The person obliged to file a statement of wealth throughout his/her term of office shall submit a declaration each year in the period which extends between December of each year and the 31st [presumably 30th] June of the following year or later, provided that the period of filing of the said return coincides with the period of filing of an income tax return for that year.”
I suspect that what the author of the text intended to say is the following: “Throughout his/her term of office, the person obliged to file a wealth statement must draw up and submit an annual declaration of his/her assets covering the period from 31st December of the preceding year to 1stt December of the reference year of the return filed. This declaration must be filed no later than the deadline for filing the income tax return for the same calendar year. It is clarified that the return filed must cover the entire calendar year at the commencement as well as at the end of his/her appointment in the political exposed post.”
It is emphatically stressed that if the above approach is not adopted, the “bridging” of the wealth statements with the published income and expenses of the intervening period would be unfeasible.
Also totally incoherent is the provision of the “updated” pothen esches, which states that “in the event of a change in any element of wealth, compared to what was declared in the preceding year, the person obliged to file the wealth return must provide an adequate explanation for every change noted”.
The incoherent nature of this requirement is rendered obvious by a simple example: The living expenses of the politically exposed person, his/her spouse and their underage children in 2022 amounted to €50,000, they purchased a car for €30,000, jewellery and works of art for €20,000, while they sold an agricultural piece of land (which was purchased many years ago for €5,000) for €40,000, they received a gift of €8,000 from a related person, while the election campaign costs incurred amounted to €22,000. In the same period, PEP’s wife contracted a bank loan amounting to €51,000, while the bank deposits increased by €2,000. The declared and taxed income of the period was €40,000 and the income tax paid on the declared income was €8,000 plus the capital gains tax on the agricultural land sold, which amounted to €7,000. The “bridging” is set out below:
I ask you: What sort of “justification” does the legislation require in relation to the wealth changes?
It is worth noting that the “updated” pothen esches makes no reference to the need to report the specific items of wealth at cost (and not at their current value). As it has happened in the past, this omission will lead to deadlock.
The administration, supervision and examination of pothen esches returns is entrusted to a special committee, comprising three members of parliament, including the president of the House. The provision for two “alternate” members of the committee has also been noted with interest. I have assumed that the provision is intended to cover the case of the “regular” members sustaining injuries. This is not a serious proposal! It is an examination on a self-service basis, where the people subject to the examination are themselves the examiners.
Finally, while the tax returns of ordinary citizens can be examined and challenged within a period of 12 years of filing, the wealth returns of the politically exposed persons must be examined within a period of three years, because, at the end of the three-year period, the returns must be destroyed! In other words, if the politically exposed person is bribed and succeeds (by exercising the influence he/she can exert from his/her position) in evading the detection of the bribe by the three-member parliamentary committee within a period of three years, then the perpetrator of the crime will automatically become untouchable!
Please allow me to disagree with the positions adopted in the “updated” draft legislative bill. In my opinion, the proceeds of bribery should be confiscated in their entirety and, in addition, the perpetrator should be punished by fines of a corresponding amount. The crime of accepting a bribe should never become time-barred and the punishment provided under the law should be inherited (along with the inherited assets) to the descendants of the corrupt politicians.
If the Pissarides-Panayiotides-Syrimis proposal on pothen esches, as set out in the White Paper that was published 2,5 years ago, is not followed, Cypriot citizens will never see a properly working pothen esches in operation.
Christos Panayiotides is a retired certified public accountant
