Interior Minister Socratis Hasikos took a barrage of questions when he addressed the House Financial Affairs committee yesterday and answered deputies’ questions on the immovable property tax (IPT) bill, the flat tax rate and the high exemption amount.

Hasikos noted that the ultimate goal of the bill is for the government to raise €100m in the fairest possible way, and pledged to provide the committee with any information required.

Property values, previously estimated at 1980 prices for taxation purposes, have been updated to reflect values as at January 1, 2013. The exercise, Hasikos said, has also added some 299,000 previously unregistered properties to the Land Registry. The combination has allowed the government to exempt all properties under €200,000 – or 54% of property owners – and impose a lower tax than previous years – a flat 0.1% on 2013 values.

Based on revaluation data submitted by Hasikos to the committee, property owners falling in the exemption bracket – under €200,000 – number 209.833, or 54.3% of all owners, holding property valued at approximately €17.75bn.

According to Hasikos, after exemptions, the net taxable values would total €155bn, raising a projected €155m in tax revenue. However, discounts for early payment reduce the government’s projected income to €137.4m.

With regard to the revaluation to 2013 prices, Hasikos said that the taxpayers will be made aware of the process followed through internet postings and information channelled through the press. At various stages, he said, there were on-the-spot visits, technology was used, and information was gathered based on property location, comparable sales, and property age and condition.

“This work would normally take five years, but needs forced its completion within 12 months,” he said. “Yes, there are mistakes and omissions, but there is something where there was nothing.”

Hasikos noted that the bill includes procedures to rectify mistakes free of charge, as well as an objections procedure on the revaluation with reduced fees that start from €37.

Responding to a remark that the tax rate should be tiered, Hasikos explained that while the Troika had tabled a proposal for a tiered tax rate, the Finance Ministry judged that a flat rate would be fairest.

Asked to comment on the problems caused by sellers forced to pay tax on property sold years ago just because buyers never collected their title deeds, Hasikossaid that since 2009, only 35% of title deeds issued have been collected.

“This is an indication of the on going crisis,” he said, adding that many owners have found themselves in limbo by land developers. “Each side must put its house in order. The government is ready to proceed with a bill regulating the issue of title deeds.”

Asked how complicated the objections process would be for citizens, Hasikos said a single document from a property valuer indicating the true value of their property will suffice.

Committee members and stakeholders alike complained that the bill was submitted at the last minute ahead of this Thursday’s final House plenary session before the summer break, leaving them with very little time to study it. Hasikos offered his readiness to provide the committee with any information it may require.

The tourist enterprises’ association STEK and the hoteliers’ association PASYXE said that hotels are production units requiring huge investments, and asked that they are treated as in other countries like Greece and Malta. Additionally, they argued that the marker date of revaluation – January 1, 2013 – does not reflect the true value of properties as the subsequent Eurogroup decisions in March 2013 caused them to tumble further.

Other stakeholders, including the technical chamber ETEK and the associations of consumers, valuers, and small businesses, argued in favour of tiered taxation and lowering the €200,000 exemption floor.

“The flat tax rate is certainly more convenient, and means that large-value property owners will not pay as much, but may impose a heavier tax burden on taxpayers whose properties are valued between €500,000 and €1.5m,” DIKO leader Nikolas Papadopoulos said.

Papadopoulos also challenged the notion of fairness in the case of one owner whose property has been valued at less than €200,000 paying no tax, and another with property valued at €210,000 paying tax on the whole amount.

“It would be fairer for the exemption level to be applicable to all cases,” he said.

AKEL deputy Yiannos Lamaris pointed out that the category of owners with property exceeding €5m in value will be burdened with a total €24m less tax than last year. In contrast, owners in the middle value bracket, who paid €17m in tax last year, will be asked to pay €28m this year.

“It is obvious that a large portion of the tax burden is being shifted from large property owners to middle property owners,” he said.

Source: Cyprus Mail