On Thursday, April 4, the Cyprus Tax Department published a new report.
It shows that local residents have not paid a colossal €2.5 billion in taxes. At the same time, the department noted that it questions the possibility of collecting from the population 1.1 billion euros of the total amount owed.
In turn, employees of the Court of Auditors, who familiarized themselves with the report, said that the Tax Department is negligent in collecting taxes from the population of Cyprus. And also does not use the tools available to it to force debtors to pay, such as the imposition of encumbrances on immovable property.
It should be noted that the department is currently considering 14.5 thousand tax appeal cases totaling €683 million. Until a verdict is reached, the Tax Department is not authorized to collect taxes from debtors. The department also cannot track the filing of income tax returns by individuals and companies - in many cases for several years. It also fails to take "adequate steps" to track taxpayers who do not declare income or declare only a portion of it, resulting in a significant loss of tax revenue for the state.
Another major problem is that the department levies taxes without conducting proper audits on companies reporting losses over the years due to write-off of investments in subsidiaries or branches.
Similarly, the tax authorities do not properly follow up on companies that report tax losses over several years and that carry forward tax losses to subsidiaries within the same group.
Meanwhile, a huge discrepancy was discovered between the number of legal entities registered in the Registrar of Companies and the number of companies registered in the Tax Department's direct tax database. A check back in August 2020 showed that 25,528 companies were listed in the former but not in the latter. And a spot check conducted between March 2018 and March 2019 found several instances of restaurants and entertainment establishments failing to file income tax returns or Form IR7, known as Employer Employee Reports.