Last year authorities collected €700 million in taxes more than they did in 2022, the Tax Department said on Thursday, while conceding there was room for improvement.

Tax Commissioner Sotiris Markidis told MPs that in 2023 they collected a total of €6.7 billion in taxes – compared to €6 billion in 2022.

“Whereas it’s true that the economy did better [in 2023] and we also had a rise in prices, a percentage of this increase in taxes collected should be credited to the Tax Department and the new mechanism,” the official said.

Markidis said a new software system, expected to be fully installed by 2025, should improve collectability of taxes going forward.

The discussion in parliament took place a week after the auditor-general released his report on the Tax Department for fiscal year 2022, showing that the state is owed €2.5 billion in taxes – of which €1.1 billion deemed doubtful as to whether it can be collected.

Despite Markidis’ assertions that tax authorities are doing the best they can, Auditor-General Odysseas Michaelides pushed back.

The audit boss acknowledged that in the last couple of years there has been a marked decline in pending taxes. But confronting Markidis, he claimed that the Tax Department has cleared hundreds of thousands of tax returns without proper checks – relying just on the declarations of taxpayers.

“He [Markidis] clears tax returns en masse,” Michaelides quipped.

Responding, the Tax Commissioner called this an oversimplification: “We don’t just push a button.”

Pressing on, the auditor-general cited cases of companies which despite – based on VAT data – appearing to be active, do not file tax returns. He urged the Tax Department to train its sights on such ‘high-risk’ companies.

Coming back to the issue of automation, Markidis insisted the department lacks the adequate tech.

“We’ve got 300,000 taxpayers, plus another 100,000 companies. If you don’t have modern computer systems, you can’t do your job as you’d like to.”

The existing computer system – worth some €30 million – used by the department is adequate for indirect taxation purposes.

By 2025, Markidis said, “I hope that we can complete the deployment of the new system.”

Defending his department’s performance, the official noted that they have imposed an additional €500 million in taxes while giving out €150 million in tax rebates to individuals and corporates.

The tax czar said the department has cleared about 2.2 million tax declarations, managing to bring clearance up to the year 2021.

Stronger deterrence for tax laggards is imperative, Markidis said.

“Penalties must be more deterrent…for instance whenever a company does not file a tax return on time, it should automatically get slapped with a €100 fine.”

In comments later, Akel MP Irini Charalambidou stressed that computerisation “is the end all and be all” for authorities.

“At long last, this state needs to be modernised, so that by entering an identity card number the relevant departments can find all the necessary information,” she said.