Pres­i­dent’s an­nounce­ment on taxes dis­ap­point­ing

Financial Mirror (Cyprus) - - FRONT PAGE -

It was with some re­lief that we heard Pres­i­dent Anas­tasi­ades’ an­nounce­ment of mea­sures for the real es­tate sec­tor. Un­for­tu­nately, the tax breaks and in­cen­tives of­fered come too lit­tle and hope­fully not too late.

We have not yet had ac­cess to the rel­e­vant bills and have to base our views on the an­nounce­ments made by of­fi­cials.

Let us take the ex­am­ple of the abo­li­tion of the Cap­i­tal Gains Tax for prop­erty bought from the date the law is passed un­til the end of 2016. Can this be con­sid­ered a mea­sure to boost sales?

What does this tell an in­ter­ested buyer?

If you have the means to buy a prop­erty by the end of 2016, and if you sell the prop­erty in the fu­ture at a time when prices are up and you make a profit, and as­sum­ing you are li­able to pay tax, then you can ben­e­fit from this mea­sure by not pay­ing Cap­i­tal Gains Tax.

The mar­ket is in ur­gent need of mea­sures that pro­duce re­sults to­day, not in some decades ahead.

I’d love to meet with the Pres­i­dent’s ad­vi­sors and have the chance to ask them how this mea­sure will boost the mar­ket. Are they ex­pect­ing buy­ers to take to the streets and start­ing buy­ing be­cause of this mea­sure? I hon­estly don’t think so…

Another ex­am­ple con­cerns the re­duc­tion of trans­fer fees by 50%.

I must ad­mit that this is an im­prove­ment (some­what) from the cur­rent sta­tus. On another note, from the time of the an­nounce­ment up un­til the law comes into force, (which we cer­tainly hope will not be too long), mar­ket ac­tiv­ity will freeze as ev­ery­one will play a wait­ing game so that they pay lower fees.

The main scope of trans­fer fees should be to re­flect the cost of the trans­ac­tion and not serve as a re­pul­sive tax levy. What on earth does a prop­erty buyer gain if on top of se­cur­ing the funds for the pur­chase, a trans­fer fee must be paid as well?

It could be just a uni­form fee of, say, 100 eu­ros, ir­re­spec­tive of the prop­erty and the price paid. Let us also not for­get the stamp du­ties the buyer has to pay for, a mea­sure which should have been abol­ished any­way.

A third ob­jec­tion con­cerns the ex­ist­ing range sys­tem. Why is it still in force? We un­der­stand that the 3%, 5% and 8% will be re­duced to 1.5%, 2.5% and 4%. It is known that this multi bracket sys­tem forces peo­ple to register all adult fam­ily mem­bers as co-own­ers to re­duce the trans­fer fees re­quired and cre­ates all sorts of prob­lems.

One also can­not help but won­der why the mea­sure is in force only un­til 2016 and not per­ma­nently.

On a pos­i­tive note, we fully agree with the abo­li­tion of mu­nic­i­pal/com­mu­nity fees which have been in­te­grated into the state prop­erty tax.

It is also pos­i­tive that the gov­ern­ment com­mon co­ef­fi­cient for all prop­er­ties.

Of course this co­ef­fi­cient is quite steep, one euro tax per 1000 eu­ros of prop­erty value. No way does it re­flect gov­ern­ment prom­ises a cou­ple of years ago that high prop­erty tax was only a tem­po­rary mea­sure.

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