MPS YESTERDAY urged the government to table a bill to scrap road tax otherwise a proposal by all parties except AKEL would be submitted to the plenum for approval.
The proposal was discussed at yesterday’s House Communications Committee, where MPs expressed their willingness to discuss any proposals by the government on ways to counterbalance the measure.
“If they don’t bring suggestions, we will submit the proposal to the Plenum as it is and everyone can take on their responsibilities,” said Committee Chairman, DIKO’s Zacharias Koulias.
But Finance Minister Charilaos Stavrakis yesterday said this was the worst possible time to scrap road tax, which he said would burden the state’s deficit with a further estimated €100 million and would affect Cyprus’ efforts to meet EU targets for reducing its deficit.
According to a Supreme Court ruling last year the House is entitled to pass the road tax law. Citing the Constitution, the Court ruled that parliament cannot pass a proposal that would increase state expenditure; however, it is possible to pass a parliamentary-proposed law that would reduce state revenue – which is the case with this specific law.
“Although everyone has admitted for years now that the road tax system is unfair and distorted, the state is still unwilling to touch on the matter,” said opposition DISY’s Lefteris Christoforou. “We want the government to present us with proposals that will increase the state’s revenue enough to scrap road tax.”
Cars, he added, are a necessity for Cypriots, who have a dire public transport system they can’t rely on. “The car, it seems, is acting as a tax collector for the state. Cancelling road tax will help those who have to use a car because of our state’s incompetency.”
Christoforou said despite the parties’ proposal – signed by all parties except AKEL – DISY was more than willing to discuss any proposal tabled by the government to reach a solution.
EDEK’s Fidias Sarikas agreed, calling on the government to present parliament with its proposals without further delays; especially seeing how the government is currently receiving around €6 million a month from the fuel tax increases imposed in July.
“When the government said it would increase fuel consumption tax, it said it would counterbalance it with measures,” said Sarikas. “We say the government should bring its own proposals, which we are willing to discuss, without further delays. But road tax definitely needs to be cancelled and the government should propose ways to do so and cover the loss of income.”
Stavrakis said that operational costs for 2011’s budget would be the “tightest” in the past 35 years. “The proposal to scrap road tax has a huge financial cost and it will worsen the deficit by around €100 million. It is clearly not within the Cypriot economy’s abilities,” he added.
Even publicly discussing the matter would have undesirable effects in the eyes of foreign analysers, who are observing Cyprus’ efforts to improve its deficit, said Stavrakis.
“At this moment, the Cypriot economy’s top priority is to improve public finances and this is not the time to table such proposals that will have huge budgetary costs,” he concluded.
AKEL’s Andreas Fakontis also said the timing was bad. “We all agree to the need for improvements to lift these distortions and injustices,” said Fakontis. “But the question is whether this period is the best to solve a chronic problem. Cancelling road tax will deduct €83 million from state funds, in the midst of a financial crisis.”
He added that if the specific proposal was passed, the government would have to find ways to make up for the lost funds. “And it will have to do so through imposing other taxes, which may not be fair considering that the largest part of the population owns” 1.5, 1.6 or 1.7-litre cars, currently costing them between €45 and €57 in road tax, while owners of a 2.5-litre car has to pay over €400.
Fakontis explained that by scrapping road tax and imposing taxes elsewhere, this would mean that car owners with a smaller horsepower would have to pay more than they already do, while those with more powerful cars will have to pay less.
“Those who are today suggesting we scrap road tax are the same people who, when the state’s finances were better, proposed we transfer the duty to fuel; now they are asking for a complete cancellation,” he pointed out. “AKEL feels such proposals that want to deduct millions from the state’s funds, are demagogic and populist. It sounds nice that we want to cancel road tax, but they don’t say what the effects will be on our state.”
Fakontis concluded: “AKEL says yes, we do need to improve the system and lift the injustices; but now is not a good time.”
