Filenews 27 August 2022 - by Eleftheria Paizanou
Taking out the "tail" of the Government and putting all the blame on the Parliament for the much-discussed change of legislation, in 2016, for the reduced VAT of 5% on the purchase or construction of a main residence, which led to the loss of millions of euros from the state coffers, the Minister of Finance, Konstantinos Petrides, responded yesterday with a lengthy written statement to the accusations of the Audit Office and the opposition.
In fact, he does not hesitate to indirectly "nail" the party from which he comes, as the controversial amendment of the legislation was the product of a law proposal by the president of DISY Averoff Neophytou, which of course was approved with the votes of all parties, except Ecologists and Alliance. At the time, it was said that the proposal was to correct the distortions in the legislation, to facilitate young couples. However, along the way it favoured (also) hundreds of millionaire investors and all those who worked alongside them (land development entrepreneurs, lawyers, business consultants, etc.).
The minister refers to the hypocrisy of the political system in all its glory, stressing that in November 2016 the legislation for the expansion of the beneficiaries of reduced VAT was approved by the Parliament, without there being any exception for investors who benefited from the social measure under the Cyprus Investment Program (KEP). In fact, in order to demonstrate the responsibility of the Parliament, he also invoked the position of AKEL MP Giorgos Loukaidis in the Plenary (without naming him), who had argued (to support AKEL's initial disagreement with the proposal, which, however, was then essentially withdrawn, as AKEL finally voted in favour of the proposal) that with the legislation 'palaces' would be exempt from taxation.
It is reminded that with the amendment of the law, from 2016 until today, reduced VAT is imposed on the first 200 sq. m. of the property, regardless of the total area. However, even before the change of the law in question, from 2011 to 2016, investors took advantage of the favourable taxation, but in it there were, if anything, some restrictions (properties with an area of more than 275 sq.m. were excluded).
However, from the report of the House Standing Committee on Finance and the minutes of the Plenary in 2016 it is concluded that there was no disagreement from the Ministry of Finance. According to the report, the finance ministry spokesman agreed to the bill, saying the cost could not be determined in advance. Not even after the passage of the bill did the Ministry of Finance express a public disagreement. Also, no move was made by the Presidential to refer the law back or report.
There was no exception
According to the Minister of Finance, in 2016 the Parliament, with its own proposal for a law, citing the European Directive and without any government initiative, decided to impose a reduced rate from 19% to 5% on the first 200 sq. m. of residence, which is used as a permanent residence and a place of residence in the Republic. He noted that the proposal was passed almost unanimously and without any mention or even thought of an exception to the KEP. As Mr. Petrides argues, the legislation made beneficiaries all those who declared the residence as their main and permanent residence in the Republic, without any exception, regardless of socio-economic data, income, size or value of housing, or whether the purchase was made within the framework of the KEP. He indicated that both Cypriot citizens (wealthy and middle class) and European citizens and citizens of third countries (including naturalized), as well as land development entrepreneurs, were favoured. He noted that the (reduced) VAT was rightly imposed on the residences of naturalized people, since it was their permanent residence and place of residence in the Republic, based on the provisions of the legislation voted by the Parliament in 2016.
POINT OF VIEW
Everyone knew but didn't speak
Somewhere in the middle is the truth. The finance minister argues that parliament did not exclude investors. On the other hand, the opposition blames the ministry for the loss of revenue from the application of the reduced VAT. The point is that both the Parliament and the Ministry seem to have known that the legislation violated the European Directive. Since the Ministry of Finance was aware of the misuse of the directive why has it not expressed its disagreement since then? The President of the Republic could have proceeded to refer the law back. But then no one did anything, as the economy seemed to be winning.
