THE UNITED Democrats have accused the Finance Minister of pandering to opposition Diko in his attempts to gain acceptance of his planned hike in VAT.
Finance Minister Takis Klerides said on Thursday that the government proposed to return around £47.2 million in tax breaks from the £62 million it expected to reap from a two per cent rise in VAT, from eight to 10 per cent.
The government insists it must gradually increase VAT to come into line with EU norms of 15 per cent.
Opposition Akel accuses the government of hiding behind the EU to introduce policies it says are harmful to the people. The left-wing party is demanding £60 million worth of tax breaks in return for the rise in VAT.
The government, which does not command a majority in parliament, needs Diko support to get the package through.
However, George Christofides, the vice-president of the United Democrats, the junior partner in the governing coalition, yesterday said the proposals should have been put forward differently.
Speaking to the CyBC, Christofides said the government’s proposals seemed to be centred around those put forward by Diko.
He said a second round of consultations on the compensatory measures should now take place between Klerides and all the political parties.
"There ended up being two standards somehow, without the Finance Minister necessarily wanting this… It is not just important for something to be passed, there must be an impression of consensus."
Christofides said that Klerides, perhaps without intending to, had given the impression that only Diko was concerned about the less well off, while all the political parties were.
Peo, the Akel affiliated trade union, was much harsher in its criticism.
In an announcement yesterday, it said the package was extremely confusing.
The union said the government was obliged by law to modify taxation every four years, based on the course of inflation.
"The government has delayed this obligation," harming workers’ financial interests, the union said.
Peo said tax breaks implemented in 1996 had been rendered now meaningless by inflation, while the current taxation system was especially unfair for pensioners, refugees, workers supporting students and workers with mortgages.
The union said changes in taxation should not be taking place only to counter the rise in VAT.
Peo said the less well off had already been hammered by taxes in recent months, "a rise in cigarette taxes, a rise in consumer taxes on petrol and diesel, a rise in tax for all-terrain vehicles, a rise in tax for spirits, etc."
The union said these rises and taxes on Stock Exchange transactions were bringing the government tens of millions of pounds, "without (the government) giving anything back."
Klerides said on Thursday the tax-free income threshold would be raised from £5,000 to £6,000 and income tax scales would be modified.
He said the minimum pension would be raised by 10 per cent and that inheritance tax would be abolished along with the CyBC levy.
