We’re not behind on tax reform, Vassiliou reassures deputies

By Jennie Matthew

CYPRUS’ chief EU negotiator George Vassiliou said yesterday that deputies’ concerns the government had fallen by the wayside over deadlines to increase VAT were baseless.

The controversy broke out on Wednesday, after EU Chief Negotiator Leopold Maurer reportedly told the House Finance Committee that Brussels expected Cyprus to increase VAT from 10 to 13 per cent by the end of the year. If they didn’t hold firm on that ‘promise’, then the island would be exposed in the eyes of the EU.

But the chairman of the committee, DIKO deputy Marcos Kyprianou, was left high and dry, claiming he had no idea that such a deadline had been agreed.

Fellow committee member, AKEL deputy George Lillikas, was quick to blame the government for sending ambiguous messages to the EU.

But Vassiliou said yesterday that the problems stemmed from a simple misunderstanding and insisted that everyone had been fully briefed about the situation.

The tax reform bill, tabled before Parliament in early November, included provision to increase VAT from 10 to 13 per cent.

The defence levy will be scrapped at the same time, before the rate is upped to the EU-required minimum of 15 per cent by the end of 2002.

Vassiliou said a separate VAT bill would only be drawn up if the tax reform bill had not been passed by the end of February.

He said a second bill would then be necessary to push through the VAT rise in order not to delay the closing of the tax and competition chapter.

” It’s nothing serious if we move fast and close the issue,”Vassiliou told journalists.

Reassured that a December 2001 deadline wasn’t obligatory, Kyprianou said yesterday the main problem was the government taking decisions without first informing the House.

Kyprianou said he was satisfied there was no compulsion to increase VAT to 13 per cent in January, only that Brussels would prefer to be informed of when the necessary rise would be implemented.

” We have been discussing tax reform and the increase in VAT with the Finance Ministry since January and on no occasion did they mention the issue of increasing VAT by the end of the year. The bill was submitted in early November, but there’s no mention of a binding date [for increasing VAT]. It came as a surprise that while we believed we were ahead of a programme, we found out that we are behind,”he said.

” What interests us is that any increases in VAT are counterbalanced by some social policies,”he added.

” I’m not sure that’ll happen in two months, but if we give the EU a specific date then they’ll be satisfied,”Kyprianou finished

The Cyprus Mail is the only English-language daily newspaper published in Cyprus. It was established in 1945 and today, with its popular and widely-read website, the Cyprus Mail is among the most trusted news sites in Cyprus. The newspaper is not affiliated with any political parties and has always striven to maintain its independence. Over the past 70-plus years, the Cyprus Mail, with a small dedicated team, has covered momentous events in Cyprus’ modern history, chronicling the last gasps of British colonial rule, Cyprus’ truncated independence, the coup and Turkish invasion, and the decades of negotiations to stitch the divided island back together, plus a myriad of scandals, murders, and human interests stories that capture the island and its -people. Observers describe it as politically conservative.