THE decision by government partner DIKO to join in Parliament’s rejection of the government bills to increase corporate tax and immovable property tax was not based on economic reality, and those who voted against the bills will “bear a huge responsibility” should Cyprus fail to consolidate its public finances within the deadline set by the European Commission, President Demetris Christofias said yesterday.
Barely disguising his anger, Christofias told reporters: “Let me tell you that I regard it as crossing the line to say that with the additional one per cent tax on profits the economy will lose out and be badly damaged. That bears no relation to reality. No relation at all – these are excuses.”
“The parties that voted against these bills will bear a huge responsibility should we breach the deadline set by the European Union for overcoming the problems of the fiscal deficit, and if the EU also decides to punish us” with fines.
Expressing his particular disappointment with DIKO’s position, Christofias said that “the others are the opposition and do what they think they should do. Those who are government partners should think twice”.
“What exactly do we want, at the end of day?”, the President said. “To help the economy to recover and the public finances to improve again? Or to simply act as the opposition, come what may?”
On Thursday, the House rejected two government bills providing for an increase in corporate tax by one percentage point to 11 per cent for two years, and the introduction of a 7 per mille tax for approximately 8,000 big real estate owners.
The two bills were part of a fiscal consolidation package aimed at reducing Cyprus’ budget deficit from 6.1 per cent of GDP at the end of 2009 to 3.0 per cent by 2013, a target set by the European Commission.
Referring to the parliamentary parties’ request for dialogue on new measures and a new strategy for handling the economy, Christofias said: “These are excuses. What dialogue did the parties carry out when the majority of them dumped on the government the expense of extending refugee status to the children of female refugees, to the tune of hundreds of millions? What dialogue? Nobody asked us.”
AKEL spokesman Stavros Evagorou said yesterday that “now is the time for each political party to assume its own responsibilities, especially the parties that are government partners.”
“The time for rejecting and voting against has passed. The moment has come for proposing, conversing and promoting measures for solving the problems”, he added.
DIKO Vice-President Nicolas Papadopoulos called AKEL’s rhetoric out-dated, and repeated his view that the government – “preferring only to co-operate with the trade unions” – had finally tabled different budget measures to those it had discussed in previous months with partner DIKO.
DISY Deputy President Averoff Neophytou said that “political arrogance cannot be accepted. You cannot mock the social partners and political parties in a flop of a dialogue.”
Finance Minister Charilaos Stavrakis said yesterday that the result of Thursday’s parliamentary vote was “certainly very negative for the economy”, since if they had been passed, a “large part of the fiscal pressures on the economy” could have been eased.
Stavrakis said that the government would continue its serious and responsible efforts, doing “all it can within its own power to take measures which do not need Parliament’s approval in order to improve public finances”, such as collecting back-taxes.
One positive piece of news for the government is that the rejection by Parliament of the two tax increase bills does not appear to have affected the trade unions’ agreement to renew the public sector collective agreements with zero increases in basic wages.
PEO Deputy General Secretary Sotiris Fellas told the Mail yesterday that when his union federation, the other main trade union federation SEK and public employees union PASYDY announced ten days ago that they had agreed to the basic wage freeze, “we never linked the possibility of the tax bills being rejected with our possibly revising our commitment over the (zero wage) increases”.
“We never said ‘if the tax increases are passed, then we will agree’ – we agreed and then called for the tax increases to be passed so that the (budget consolidation) measures are balanced”, Fellas said.
In a press statement issued yesterday, the Cyprus Chamber of Commerce and Industry (KEVE) said that “the structural problems of the Cypriot economy are the result of cumulative wrong choices by every government of the last 50 years. The current crisis simply brought these to the surface and we no longer have the luxury of sweeping them under the carpet.”
“The executive power ought to take the initiative of making proposals for correcting the distortions in the economy, and the legislative power ought to respond constructively so that common solutions can be found. No-one can bear the burden of such decisions on his own, and a collective approach is necessary.”
