THE CABINET has approved a series of 22 measures proposed by the Finance Ministry designed to combat the long-standing problem of tax evasion, government spokesman Stefanos Stefanou announced yesterday.
The detailed measures together represent a significant tightening-up of existing procedures. Apart from aiming to put an end to the outmoded banking secrecy laws governing permanent residents, they also put new weapons in the hands of the Inland Revenue Department (IRD).
For example, any withdrawals or loans drawn from companies by directors and their family members will henceforth be treated as dividends for tax purposes. Where a company fails to pay taxes due, those directors genuinely and objectively responsible will be personally liable.
Administrative fines will be payable for failure to fulfil tax obligations or for making inaccurate tax declarations. In case of a company being liquidated, the tax obligations of the company itself and its directors will be settled in detail.
Where a person has not fulfilled its tax obligations for various tax periods, the IRD head will be given the discretion to estimate the tax payable on the basis of available information. Significantly, all government or local authorities will be obliged to disclose to the IRD on demand any information that could be used to enforce the tax laws.
Stefanou said that Finance Minister Charilaos Stavrakis has been mandated to consult with representatives of the main political parties and the social partners – trade unions and employers’ organisations – on the measures with a view to creating the widest possible co-operation over implementation.
Ultimately, at least four existing laws will have to be amended for the new measures to be implemented, and so will require approval by the House of Representatives.
The government spokesman said that the government is determined to deal with the issue of tax evasion decisively, because “on top of the various other problems facing the economy, the government is being deprived of revenues it is entitled to”.
Stefanou declined to make any detailed comment on how the measures might affect large businesses, and medical and legal practices that are known to declare very low incomes, saying he preferred to wait for the completion of the consultation to be held by the Finance Ministry.
He added: “However, I would like to say that in relation to the implementation of the measures, of course it has been noted what the situation is, where the problems lie, and where the gaps and weaknesses are which need to be addressed.”
No formal timeframe has been set for the consultation process, but the indications are that it will be at least two months before any conclusions will be announced.
