THE SLAPDASH improvisation of economic policy by the government seems to have no end. Every few days, another misguided and badly-thought out idea, allegedly aimed at reducing the budget deficit, is mentioned by an AKEL deputy on orders directly from the presidential palace. The objective is to test public reaction, because the government is not only afraid to take unpopular decisions, it is in a quandary about what it should do.
The latest idea to be peddled by AKEL is an increase in corporate tax for a two to three year period, the reasoning being that businesses should shoulder some of the burden of dealing with the recession. Yet another resoundingly stupid idea thought up by people who do not have the slightest clue how a market economy operates. Any such measure would cause much more harm than good to the economy, a prospect that escaped AKEL’s and the government’s great economic thinkers.
In combination with the new tax evasion laws, currently under discussion, a higher corporate tax would push us deeper into recession, stifling instead of boosting growth and causing more job losses. A higher corporate tax would mean less money for companies to invest in future operations and, together with the drive to collect tax dues, even more cash would be taken out of the economy. The last thing we need during a recession when money is already tight.
There is also the small matter of attracting foreign businesses, which, according to the finance minister, is meant to be one of the government’s policy objectives. The measures being considered are more likely to drive Cyprus-based businesses out than encourage new ones to come here. Many of the tough measures aimed at tax evasion would wreck the island’s attractiveness as an international business centre. No foreign businessman would set up shop in a country that would be able to inspect bank accounts, make company directors personally liable for delaying tax payments, regard company loans for directors as taxable and so forth.
The government is going out of its way to make Cyprus as unattractive as possible to foreign businesses while its drive to collect unpaid taxes would put us deeper into recession and for what? So that the public sector unions could be persuaded to go without pay rises for a couple of years and to accept cuts in the obscenely high public sector pensions. We will wreck the country’s economic prospects because the government is incapable of doing anything without the approval of the unions.
And unfortunately it has bought into the warped union logic that everyone must share the burden of reducing the budget deficit. But why should everyone suffer, considering the deficit was caused by the greed and selfishness of public sector workers? They should be making the sacrifices now instead of setting conditions which, if met, would cause long-lasting damage to the economy.
