UNDER NEW laws passed by parliament yesterday, businesses could expect surprise visits from the taxman outside of office hours.
The raft of new measures is contained in five of the government’s six bills to combat tax evasion and avoidance, which were passed by the plenum.
The new laws also provide for stricter fines for delays in submitting tax returns and make it easier for the Inland Revenue Department (IRD) to lift bank confidentiality.
The bills, which were part of the government’s commitment to civil servant unions in exchange for possible salary concessions, have been part of intensive discussions at the House Finance Committee since last April. The government hopes the move on tax evaders will assist economic recovery.
The five bills were passed unanimously by all parties with two dissenting voices; that of EVROKO’s Rikkos Erotokritou and EDEK’s Marinos Sizopoulos, who abstained on two of the new law’s provisions.
Sizopoulos nearly achieved a postponement of the plenary vote, after spotting what he said were changes and additions in the Finance Committee’s final draft that was handed to MPs yesterday. This resulted in an hour-long interruption of proceedings.
On their return, Committee Chairman DIKO’s Nicolas Papadopoulos, said the MPs had decided that the new laws would come into force in six months’ time – instead of three, which was in the draft – in order to offer taxpayers the chance to adjust.
“Combating tax evasion is a solid goal of the state,” said Papadopoulos. “Those who are avoiding paying their taxes, are doing so at expense of the rest of society.”
The new regulations make it easier for IRD to lift bank confidentiality on taxpaying residents of Cyprus as well as carry out criminal prosecutions, after securing the approval of the Attorney-general.
The IRD will also be able to carry out checks on the running year’s transactions, as opposed to just the previous years, as was the case so far.
A ban has been imposed on deducting expenditures that aren’t backed by legal documents from taxed income, while stricter penalties – as well as incentives – have been enforced to encourage the submission of income tax returns.
Tax or contributions for defence will be deducted from rent paid by legal persons, while administrative fines will be imposed on those who delay or fail to submit their tax returns and generally don’t live up to their taxpaying obligations.
Companies will from now on have to submit their tax returns online, as will those who submit their tax returns through professional offices. Another new regulation sees the introduction of incentives to encourage taxpayers to submit their tax returns online.
Furthermore, authorised government officials will have the right to carry out sudden checks on businesses. These checks, according to the new law, will be carried out on any day or at any time, independent of the normal public service working hours.
A detailed regulation has been included on a company’s and its managers’ tax obligations in the event that their business closes down.
It is also now obligatory for a company to issue a tax identity card number immediately after the company has been set up, while the IRD must be informed straight away if any changes are made to the company.
The IRD head will have the authority to decide – based on the data obtained – on how much tax will be owed by someone who fails to submit his or her tax returns.
Last but not least important is the right for the IRD to obtain any documents or data from state and local authorities, which can be used to help the Department implement tax laws.
The bill that was postponed included a regulation that would pass responsibility for taxes owed by companies onto the managing directors as persons, thus exposing them to criminal prosecution.
It also referred to a ban on selling property unless the IRD has been paid what it is due, as well as an effort to combat delays in paying the special contribution to defence by using other holding companies.
The Finance Committee will continue discussions on the sixth and final bill, before sending it again to the Plenum
