The government is set to raise over 400 million euro from taxes it expects to collect, Finance Minister Kikis Kazamias has said, as the House prepares to begin a debate on the 2012 state budget.
Speaking to the press on Saturday, Kazamias said that 167,5 m. are dues to the state coffers from last year, 165 m. are dues of the past 2-5 years and the rest 90 m. are dues going back six or more years.
He also said that the state has taken people to court to collect taxes due, adding that in some cases properties have been seized and in other cases people are paying their arrears through installments.
Replying to questions, the Minister said there is room for improvement in the Income Tax department as far as tax collection is concerned, noting however that the department must become fully computerized to help this effort.
“In 2003 about 40% of natural persons paid their taxes and in 2010 more than 80% did so,” he pointed out.
He said that on Wednesday the President will chair a meeting of government officials dealing with tax collection, the Auditor General, the Accountant General to discuss matters relating to tax collection.
The Minister noted that citizens must shift their approach on paying tax and realize that it is their legal obligation to do so and called on them to stop finding loopholes in order to avoid paying their dues to the state.
“We politicians must also give the right example when we demand that people must abide by the law,” he added.
The Minister called on MPs, who are not satisfied with the package of austerity measures the government has submitted aiming at fiscal consolidation, to put forward their own proposals.
He said since he tabled before the House the bills on the measures and the state budget at the beginning of October, he has not received any proposal on the matter.
Amid the continuing financial crisis and the weak growth of the Cypriot economy, projected at a mere 0.2% GDP in 2012, the government introduced a series of austerity measures that would enable Cyprus to meet its medium term commitments to the EU and particularly for a budget deficit of 2.8 GDP in 2012 and a zero deficit by 2014.
On August 27 the Parliament approved the first fiscal consolidation package with a fiscal impact of 1% GDP or 180 million EUR, while a bill for the increase of VAT rate to 17% from 15%, which would yield an additional 140 million euro to the state coffers, is pending for approval.
The Cabinet also approved a second fiscal consolidation package, incorporated in the 2012 state budget, which would reduce the budget deficit below the 3 per cent Euro area benchmark (2.8%) in 2012. The package provides for the abolition of 939 vacant positions in the public sector, a 10% reduction of the starting salary of civil servants, the introduction of income criteria for the better targeting of welfare spending such as child allowance and student allowance (100 million EUR).
On November 18 the Finance Minister introduced a third fiscal consolidation package aiming at restoring Cyprus' credibility in the international markets. The package provides for the freezing of salary increases in the public sector (including COLA) for two years, with a yield of 355 million EUR, a scaled contribution of high earners in the private sector and the introduction of a 0.5% levy on the turnover of companies with local activities for two years.
According to the EU' new economic governance provisions, Cyprus must take concrete steps for the correction of its public finances. Otherwise a fine of 0.2% GDP will be imposed.
