FIGURES on the earnings of the self-employed given to the House last Monday by the head of the Inland Revenue Department, Giorgos Poufos, made for fascinating reading. According to Poufos, there are 21,710 self-employed of whom only 24 per cent (4,178) declare an annual income above the tax threshold of £10,000; and only a paltry five per cent (994) declare an income in excess of £20,000 a year.
The self-employed he was referring to included lawyers, doctors, architects, civil engineers, accountants, electricians and plumbers who are not among the low-earners of our society by any stretch of the imagination. It suffices to say that most doctors charge between £15 and £20 per routine consultation, which lasts about 10 minutes; plumbers and electricians, have a minimum call-out charge of £25 pounds for the smallest job. Admittedly, there may be some professionals who do not earn much money, but they are in a minority.
The IR department is convinced that a large number of the self-employed are depriving the state of income and has prepared legislation that would enable it to clamp down on the tax cheats. This is part of the state’s efforts to increase revenue and control the fiscal deficit. Clamping down on tax evasion is also a matter of social justice, by forcing high-earning, self-employed professionals to pay tax that is more in line with their income, instead of the bulk of the tax burden being shouldered by wage-earners, who contribute 80 per cent of the total income tax paid, compared to nine per cent by the self employed.
Until now, the self-employed have been exploiting a law that was geared to help tax evasion, by exempting individuals with income below the tax threshold to submit a tax declaration. The IR department’s new bill provides that everyone should submit a tax declaration even if one’s income is below the tax threshold.
Once such declarations exist, IR inspectors would be able to carry out effective checks. For instance, a person who had earned less than £10,000 in each of the last four years, would have to explain where he found the cash to buy an expensive car or buy a new house. Fear of being caught would deter people from making false tax declarations.
Unfortunately deputies failed to understand this point and insisted that only those with taxable income should be forced to submit tax declarations. Their excuse was that they did not want to inconvenience citizens whose income was below the tax threshold. Even worse, deputies also opposed another important stipulation of the bill – making the keeping of accounts that would be audited and submitted to IR, compulsory for all the self-employed who had a turnover in excess of £25,000. This would be a big financial burden for them, claimed deputies unconvincingly.
These pitiful excuses give the impression that deputies want to protect the tax cheats, a suspicion strengthened by the fact that the relevant bill has been gathering dust in legislature for 16 months now. It would be no surprise if it takes the House finance committee another 16 months to discuss and agree on the provisions of the bill.
