THE HIGHER TAX on immovable property that would be levied from next year will have many negative repercussions that were obviously not considered by the government when it drafted the tax categories. Its only consideration was to satisfy the long-standing demand by moaning union bosses for the taxing of wealth. Now it could boast that it was taxing ?the haves?, even though it would be creating additional problems for the struggling economy in the process.
The funny thing was that the troika had, reportedly, forecasted a revenue of ?20 million from the tax, but the government increased the tax rate so that revenue would be ?70 million. However, based on the calculations of the Cyprus Hoteliers? Association, the tax would bring the government revenue closer to ?200 million, indicating that it is punitive, badly-thought out taxation than just an attempt to improve state finances.
At a news conference yesterday, representatives of the two hoteliers? organisations explained that the immovable property tax that hotels would have to pay would increase tenfold. For example, a four-star hotel that paid ?21,000 in immovable property tax in 2011 would be called to pay ?191,000 next year; a five-star hotel in Ayia Napa which paid ?20,000 last year would pay ?215,000 in 2013. The higher valuation would also translate into higher sewage rates and municipal rates, which could add tens of thousands more on its annual tax bill.
How ironic that a government that constantly harps on about the need for growth and development would propose tax increases that would make the tourist industry less competitive. Is this how new jobs will be created, by increasing the annual tax bill of hotels, even when they?re operating at a loss? It just makes no sense and we suspect the government gave no thought to the matter in proposing tax rates three times higher than what the troika had demanded.
But it is not only hotels that will be lumbered with crippling tax costs. Other businesses will also suffer,as will householders. What will happen to developers, with scores of unsold apartments, who are already heavily indebted to the banks? Where will they find the money to pay the immovable property tax, at a time when the property market is stagnant? In a way, it would be punishment for developers who have failed to issue title deeds to buyers as they will be lumbered with the immovable property tax. And what will happen to the country?s biggest landowner ? the Church? Where will it find the millions it would have to pay in taxes on all its property holdings? Will it be exempted again?
We do not know what scope the political parties have to modify the provisions of the bill on the immovable property tax, but if it is passed unchanged it would push the economy even deeper into recession.
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