THE CHURCH insisted yesterday it was its constitutional right not to pay taxes but it nevertheless did so due to its magnanimity, a Church official said.
Taxes have been the focus point of a bitter spat between Church and state in recent days, which included the exchange of offensive epithets.
The Archbishop called President Demetris Christofias a “liar” and a “populist” only to be called an “embezzler who lives in opulence” by the government spokesman.
The law on income tax exempts the Church on things like donations and income from rent.
But the Church insists it is also exempted by the constitution from paying – though it does — such things as immovable property and capital gains tax.
The state auditor-general disagrees.
The argument is based on Article 23, paragraph nine of the constitution, which says that no deprivation or limitation of the right to movable or immovable property belonging to any See, monastery, church or any other ecclesiastical corporation or any right over it or interest therein shall be made except with the “written consent of the appropriate ecclesiastical authority being in control of such property … “
“It means you cannot, either through tax or anything else, seize movable or immovable property belonging to the Church,” its chief auditor Yiannis Charilaou told the Cyprus Mail. “When you cannot collect something how can you tax it?”
Asked why then the Church pays capital gains and immovable property tax Charilaou said “we pay them, because the Church decided, its magnanimity, to help and pay and no one can bind it.”
The auditor-general has said that that the constitution does not exempt the Church from paying taxes.
This was tested in 1999, when the attorney-general appealed to the Supreme Court, against the decision of a district court that ordered the state to return to the Archbishopric some €418,000 in capital gains tax.
The Supreme Court ruled in favour of the state: The obligation to pay tax is predicated on the law and not the means it provides for its forced collection. And if it is supposed that Article 23.9 of the Constitution rules out forceful measures to collect taxes owed by Church Authorities, this weakness does not alter the nature of the obligations. If this were accepted, we would effectively have two measures for the determination of the obligations of Church Authorities and any other subject – a position that violates the principle of equality.
In her report, the auditor-general said that, on December 31, 2008, the Church owed around €169 million: €138 million in immovable property tax and €30 million in capital gains tax.
According to the auditor-general, until 1999, the Church had refused to pay its capital gains tax, but despite that the transfer of the property still went ahead.
In 2002, Parliament amended the law, making the payment of capital gains tax mandatory before any transfers can go ahead.
The previous administration had had discussions with the Church leadership in a bid to resolve the issue and a preliminary deal had been reached.
But it was never brought before the cabinet and the auditor-general said was unfair to the state because tens of millions in past dues were written off and privileges were restored.
