FORMER HOUSE President Alexis Galanos warned yesterday the intended government crackdown on secret accounts could put Cyprus at risk of losing hundreds of millions of pounds to banks in the Far East, if it was not preceded by a new tax amnesty incentive.
Referring to a law in the making which would remove banking confidentiality and open up secret bank accounts to new taxes, Galanos maintained the timing was wrong and the policy contradictory.
The former DIKO politician and current head of the Council of Economic Experts (CEE), a 14-member group directly answerable to President Tassos Papadopoulos, said the law on tax amnesty should be passed first before secret accounts were targeted, otherwise billions of pounds could leave the island, and which would “defeat the purpose,” he said.
“The name of the game is for money not to leave Cyprus. This is not populism, it is about the public interest,” he added.
The state hopes to rake in up to £200 million from new taxes on secret accounts, once a bill is approved enabling officials to crack down on tax evasion by removing banking confidentiality. Galanos estimates around £1.5 billion is currently held in Cyprus in secret accounts.
The move is part of the government’s drive to rein in the public deficit, which is forecast to reach 5.4 per cent of GDP this year, far exceeding the three per cent euro zone limit. The authorities also announced measures in the form of a partial tax amnesty for tax evaders as an incentive to declare capital.
“If you open up banking confidentiality without offering the tax amnesty first, it’s to be expected that a lot of money will leave and go to the Far East, outside of Europe,” warned Galanos.
On behalf of the CEE, Galanos wrote a letter to the President a few days ago asking for an explanation to the thinking behind the legislation under discussion regarding banking confidentiality.
“The President asked us to prepare a study on a special tax status, with the aim of keeping money on the island during this difficult stage. We submitted the study a few months ago with proposals on a tax amnesty and he agreed with it.
“We were under the impression that the first priority was to see what to do about the special status. We were not informed (of the draft legislation on banking confidentiality). Our policy is to know the thinking behind this legislation,” said Galanos.
He claimed the government policy was contradictory. “For us, the policy is contradictory. We are not against getting rid of confidentiality at the right stage. But the timing is wrong. If the tax amnesty were passed first, things would be different,” he added.
Galanos insisted this view was not meant to serve the purpose of tax evaders, but was an effort to avoid the mass exodus of capital from the country, losing the state millions in tax.
“Many people in this place, and the banks are also responsible for this, have secret accounts in Cyprus and abroad using different names. Now, under EU laws, banking confidentiality will be lifted and these people will pay fines and taxes on accounts that will have to be declared. We are trying to stop money leaving Cyprus, probably to Singapore and Hong Kong. But there is a danger of this not happening because the timing of the law is wrong.”
“The Finance Minister apparently sees things differently,” said the economic advisor to the president, adding, “Mandarins, as you know, are not always right”.
