THE INLAND Revenue Department of the Finance Ministry has announced an 8.7 per cent increase in tax earnings in the first ten months of the year to around £504.9million.
The increase is up £40m compared to the £464.6m collected in the same period of 2004
A tax amnesty introduced earlier this year, which offered lower tax to individuals who had previously failed to disclose their earnings or savings, gave a significant boost to state coffers and reduced Cyprus’ deficit by one per cent of the gross domestic product.
As a result the islands deficit outlook now stands at 2.5 per cent of the gross domestic product, compared to 2.9 per cent of the GDP of earlier estimates.
Euro zone rules expect members to keep their budget deficits below three per cent of the GDP and show progressively declining levels of public debt. Last year, the Cyprus pound entered the European Exchange Rate Mechanism (ERM2) which is a necessary step for the adoption of the euro as currency. The government plans to join the euro in January 2008.
Revenues from the tax amnesty and the value added tax had improved the fiscal condition of the island. Government economists say that despite the prevailing unfavourable international economic conditions Cyprus GDP will increase by four per cent in 2005 and by 4.2 percent in 2006.
A spokesman at the Ministry described the amnesty as “a great success”.
“The reaction of the people has been better than expected and we received more then we had hoped to.”
He added that, “if people didn’t take advantage of the amnesty, they will have problems in the future as the government now has more weapons in its hands to come down hard on tax evaders.
“According to EU legislation, if the authorities of a member state ask us to provide them with financial information on one of their citizens living in Cyprus, we must do that. It is also illegal for banks in Cyprus to open secret accounts for customers, with more control exercised by the Central Bank.
The amnesty has been talked about for a long time, with the previous government initially getting the ball rolling.”
The spokesman then commented on an article in yesterday’s Politis newspaper, which stated that the many of Cyprus’ self-employed are getting away with massive tax evasion.
“New legislation making it harder to cheat the system is with parliament,” he said. “We have been asking for this for many years now. As it stands it’s just too easy for people filling out their tax returns to claim that their expensive boats or cars don’t actually belong to them.”
