Government prepared to discuss tax reform once VAT increase passed

THE Government is ready to begin dialogue on tax reform after VAT is increased, Finance Minister Takis Klerides said yesterday.

He was speaking after a meeting with the trade unions, whom he briefed on the government’s proposed tax breaks to offset the imminent two per cent rise in VAT.

On Thursday, Klerides told a news conference the government would return £47.2 million in tax breaks from the £62 million it expects to reap from the VAT rise.

The Finance Minister said there had been no agreement at yesterday’s meeting since the trade unions had different views on the issue.

He did say, however, that the government was willing to discuss an overall tax reform to take effect in 2001.

"The new tax scales when approved by the House will be effective for the year 2000.

"For later, the whole tax system is open for discussion," Klerides said.

The trade unions said yesterday there was a huge gap between them and the government on the tax issue.

They said they would no focus on the House and parties to pursue improved proposals since, as they said, dialogue with the government was over.

The trade unions nevertheless saluted the government’s decision to open dialogue on tax reform.

To counteract the increase in VAT, the government last week pledged it would increase the tax-free threshold to £6,000 from the current £5,000 and modify income tax scales.

Klerides said the minimum pension would rise 10 per cent, while inheritance tax would be abolished, costing the government an annual income of £4 million.

The minister also said the administration was scrapping the CyBC levy currently raised as a proportion of consumers’ electricity bills.

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