New tax measures ‘fail to deliver fairer system’

Tax reform measures approved by the House of Representatives on Monday fail to deliver a fairer system, trade union Peo said on Tuesday.

Peo said the goal of creating a more socially just tax system has not been achieved by the legislation passed.

The union said it will continue to push for a fairer distribution of tax burdens and for a redistribution of state resources in favour of workers, pensioners and vulnerable groups.

These measures include the need to reduce VAT on basic goods, electricity and fuel, introduce major changes to social policy, and move towards taxing wealth and excess profits.

Peo said it had submitted detailed positions to the centre for economic research at the University of Cyprus, the finance minister and the House of Representatives.

These positions were based on an analysis of developments in Cyprus since the previous tax reform, focusing on taxation and the distribution of national income.

It said a comprehensive tax transformation should lead to a more socially just tax system.

On personal income tax, Peo said it was amongst those whose pressure led to an increase in the tax-free threshold to €22,000.

It also described as positive the House’s rejection of the government proposal to tax income from business activity earned by provident funds.

However, Peo said that despite these improvements, the government and a majority in parliament refused to introduce taxation on very high incomes. It said this is necessary for the tax system to be balanced and fairer.

The union said the imbalance in the tax system is made worse by the refusal of the government and most parties to adopt proposals for taxing property valued above €3 million and for introducing an annual levy on companies on a progressive scale.

This, it said, deprives the state of millions of euros that could be used to expand social policy.

The union added that most workers with incomes below the tax-free threshold will not benefit financially from the measures approved as they will continue to bear the burden of high indirect taxes.

Peo said that once again, when choosing between policies that support the majority and vulnerable groups and policies that protect the privileges of a few, the balance has tipped in favour of the few.