THE OVERLY complicated system of allowances paid to MPs, state officials and other senior figures, which sees them paid up to €33,000 tax free, needs an overhaul, DIKO Vice-President Nicolas Papadopoulos said yesterday.
He said some of the allowances given in the public sector should be regarded as taxable. “But they are not treated as such, and that’s a problem.”
“Some allowances are given on a regular monthly basis and cannot be viewed as, for example, attendance expenses, as there is no proof whatsoever that they are being spent as part of carrying out one’s duties. So in practice, they are being given to someone who uses their discretion as to how they are used. Since such payments are made on a regular basis, they should be counted as income,” he added.
As the government focuses on limiting the budget deficit this year to 6.0 per cent of gross domestic product (GDP), which in practice means generating €175 million in savings and extra revenue, it faces regular accusations of failing to tackle the problem of the enormous state payroll, which at €2.4 billion accounted for around a third of the state budget in 2009.
One way of realising more tax and creating the conditions for making more savings would be by clarifying which public sector allowances should be treated as benefits in kind and taxed accordingly.
The 2010 budget includes an exhaustive list of all the salaries, allowances and benefits payable to government and semi-governmental officials and civil servants. Since it was approved at the beginning of the year, the President, Ministers and members of the House of Representatives have all agreed to a 10 per cent cut in basic pay for two years.
Under the original budget, President Demetris Christofias received €100,793 in annual basic salary. Items such as travel and secretarial expenses are dealt with separately as part of the funding of his office. Government Spokesman Stefanos Stefanou receives €97,900 annually (€64,835 basic salary, plus €33,065 in tax free “Representation Allowance”), the same as Presidential Commissioner George Iacovou.
“The allowance system is overly complicated, and unjustifiably so. Something needs to be done about it. In fact, I intend to raise it for discussion in the House Finance Committee. There needs to be a broader general review of allowances, because it is not justified for this system to be so widespread in the public sector,” Papadopoulos said.
Referring to his own situation, Papadopoulos said: “I think we first need to decide to what extent an MP’s allowance is income or not. It is one thing to receive funding from the House to employ secretarial staff, and allowances to cover the expense of attending functions such as weddings, etc. For the latter, the House should at least ask us for receipts to show that the money was used for that purpose. But it is quite another thing for the House to give a regular allowance, which you know you will receive month after month without being required to justify how you have spent it.”
MPs have a choice whether to have just their basic pay taxed at source (“pay as you earn”), or to make their own income tax declaration.
In terms of when we might expect legislation on the matter, Papadopoulos said that “as a first stage, there will be a discussion on the general policy on allowances in the House Finance Committee in September.”
WHO’S MAKING WHAT
As President of the House of Representatives, Marios Garoyian receives €130,663 annually (€81,500 in basic salary, plus €28,660 in representation allowance, €8,201 travel allowance and €12,301.93 secretariat allowance). Garoyian also gets to appoint his Office Director (€54,444 basic plus €6,150 allowance) and Special Advisor €52,843 plus €4,100 allowance).
Each of the 55 elected members of the House of Representatives receives €86,373.93 annually (€42,945 in basic salary, plus €22,926 in representation allowance, €8,201 travel allowance and €12,301.93 in secretariat allowance). They are also allowed to purchase a car tax-free.
The highest-paid civil servants are the Permanent Secretaries in charge of administering the ministries, who each receive €78,580 in basic salary plus €18,000 allowance.
The same €18,000 allowance is given to the Attorney-general and his Deputy (both on €92,475 basic), the Auditor-general (€70,685 basic), the Accountant-general (€78,580 basic) and the Ombudswoman (€70,685 basic). The Law Commissioner receives €23,437 allowance on top of €71,020 in basic pay.
All allowances listed above are currently tax free.
The above figures do not take into account thirteenth salaries, the Cost of Living Allowance, and other allowances covering things such as entertainment, cars, etc.
