IT WAS high time the head of the Inland Revenue Department (IRD) Giorgos Poufos put the record straight regarding the collection of back taxes and tax evasion, which had been presented by disingenuous union bosses as the root cause of all the economy’s problems.
This view was reinforced by the Auditor General’s report, released on Tuesday, which claimed that the state was owed close to €1.5 billion in taxes, €1bn of which was owed to the IRD. In fact 40 per cent of this amount was the Auditor-General’s estimate of what was owed in interest and fines to the department and was based on the assumption that the €600 million was collectable.
Poufos explained however that only €422 million was collectable as the remaining 30 per cent was owed by companies or individuals who were bankrupt and had no assets to liquidate. In short, these were bad debts for which provision should have been made by the IRD as happens with private companies, instead of presenting a distorted picture of what it was owed.
As regards tax evasion, Poufos claims the IRD did not have the legal weapons to clamp down on the tax cheats; even the bills recently prepared were inadequate compared to other countries in which tax authorities had sweeping powers, he said. Is the problem the lack of legal weapons or the existence of loop-holes in the law that are exploited by smart lawyers?
The government will supposedly try to address these weaknesses. The finance minister is due to meet Poufos today while President Christofias called a broader meeting that would include the Attorney-General, Auditor-General, Chief of Police and finance minister to discuss how the authorities could catch the tax evaders.
How ironic that state officials who, like deputies, benefit from legalised tax evasion will be discussing measures designed to fight tax evasion. A commendable initiative, but first, the presidential meeting must address the lawful tax evasion from which participants in the meeting benefit. The so-called ‘representation allowance’, which amounts to €18,000 a year (it is pensionable and therefore part of their salary), must be taxed. The benefits in kind, such as government car for which they pay nothing, and free healthcare should also be taxed as is the case of private sector employees.
Once the government puts an end to the scandalous tax evasion by deputies and senior state officials, enshrined in law, it could give the IRD the weapons it needs to clamp down on tax-evading doctors, lawyers, dentists, electricians and businessmen. The IRD should treat everyone in the same way and not have a different set of income tax criteria for our political elite and another set for everyone else.
