By Angelos Anastasiou
Lowering taxes, imposing heavier penalties for tax evasion and renegotiating the terms of Cyprus’ economic adjustment programme were some of the measures proposed by a University of Nicosia study on tackling the issue of non-performing loans.
UNic professors Andreas Theophanous, Christoforos Christoforou and Kyriacos Georgiou presented their proposal on Tuesday.
It included a comprehensive redesigning of fiscal, growth and social policies, with a focus on lower taxes and tougher penalties for tax evasion.
“The belief that the problem will be addressed through foreclosures alone is a fallacy,” said Theophanous. “It is imperative that a comprehensive alternative is promoted, which will focus on the easing of the terms of the Memorandum [of Understanding] and fostering conditions for a real recovery.”
Theophanous said the study comes at a time when, both within the European Union and elsewhere, the strategy of hard austerity is being questioned, while the recent Eurostat decision to improve the method of calculating GDP is a clear admission of the policy’s shortcomings.
The study proposed that Cyprus ask its EU partners for multi-faceted support, which could range from a form of ‘Marshall Plan’ to targeted financial support and significant easing of the terms of the Memorandum (MoU).
It also proposed that serious efforts are made to renegotiate the amount of emergency liquidity assistance (ELA) transferred to the Bank of Cyprus from now-defunct Laiki Bank, following its resolution.
In terms of lowering taxes, the study argued that the top income tax bracket should be lowered from 35 per cent to 30, the value-added tax should be lowered from 19 per cent to 15 and 9 per cent to 7, and the 10 per cent company tax should be restored, with a view to attracting deposits and foreign investments.
According to the proposal, further salary cuts would deepen the crisis and should be avoided, but personnel in the public and broader public sectors should be reduced through various measures and the consolidation of municipalities and other services.
Lastly, it was suggested that cases of countries that have faced similar problems should be studied, along with the solutions they employed.
A political campaign in favour of renegotiating the terms of the MoU – especially the definition of what constitutes a non-performing loan – has recently been spearheaded by DIKO leader Nicolas Papadopoulos, who shifted from his earlier pro-MoU position.
The campaign to renegotiate gained some momentum after other opposition parties voiced support but their calls have thus far been ignored by the government, which has repeatedly asserted not much is left to renegotiate so close to the end of the programme.
