Property tax will kill tourism, say hoteliers - Cyprus Mail

HOTELIERS yesterday warned the restructuring of immovable property tax (IPT) as provided in the draft memorandum with the troika, would put them out of business and kill off any competitive edge Cyprus has over neighbouring countries.
Increases in the immovable property tax (IPT) regime, agreed as part of the island?s bailout, make Cyprus an extremely expensive tourism destination, they argued.
The Cyprus Hotels Association (PASYXE) and the Association of Cyprus Tourist Enterprises (STEK) yesterday said they were willing to pay double what they pay now in IPT but argued that the new regime effectively increases hotels? taxes tenfold.
Instead of taking measures to raise ?20m from immoveable property as the troika requested, the government decided to go even further and propose measures to collect ?69m next year, they said.
However, both PASYXE and STEK yesterday claimed that the new property tax regime will result in much higher revenues of ?180m - ?200m.
The hoteliers called on the government to get the Land Registry to calculate how much the new IPT will bring the state in taxes.
The two hotel associations called for a reduction in the proposed tax and for implementation of an open skies policy with neighbouring regions like Asia, which include important new tourism markets like Russia and potential markets like China.
They revealed a letter sent to Commerce Minister Neoclis Sylikiotis by Russian tour operator Biblio Globus, responsible for bringing 265,000 Russian tourists to Cyprus this year alone, accounting for 70 per cent of all Russian arrivals.?
In the letter, Biblio Globus calls on the government to lift flight restrictions imposed on its strategic partner Transaero Airlines which prevent it from landing in Cyprus eight months of the year.
Regarding the proposed tax increase, PASYXE chairman Haris Loizides highlighted his case, giving an example of a four star hotel with 200 beds which will be charged an extra ?200,000 as a result of the IPT adjustment, and double that taking into account other general tax increases, including VAT, fuel, alcohol, social insurance contributions, and ad-hoc contributions, taking the total amount in new taxes to ?410,000 annually.
?For a four star hotel in Larnaca, the IPT goes from ?21,000 in 2011 to ?191,000 in 2013. For a five star hotel in Ayia Napa, the IPT goes from ?20,000 in 2011 to ?215,000. A five star hotel in Limassol will pay from ?27,000 to ?253,000 and a five star hotel in Paphos the tax goes from ?37,000 to ?260,000. You understand these are not numbers that one can call reasonable,? said Loizides.
Instead of helping the one industry that seems to be weathering the storm of the economic crisis, the government is helping to shrink it, said Loizides.
?We cannot understand logic which strangles the only positive aspect of the economy today,? he said.
He further noted that for an equivalent four star hotel in Greece with 250 rooms on 70 acres, the IPT came to ?2,000 before the country signed a memorandum with the troika. After the memorandum, the hotel will pay ?20,000 a year for two years only.?
How can Cypriot hotels compete with Greece, he asked.?
The Cyprus Association of Immovable Property Owners also expressed their ?intense concern, agitation and confusion? about the proposed law yesterday.
The association warned of ?the serious risk that properties will be concentrated in the hands of the few and wealthy since the rest will be forced to sell to avoid the heavy tax burden.?
Earlier in the week, developers also voiced their concern over the changes, saying it will jeopardise the already badly-hit sector?s prospects.
In a written statement, the developers association also warned that many people will be forced to sell their properties because of the high tax.
This will in turn force the value of mortgaged property down and create fresh recapitalisation needs for the banks, the developers said.
The preliminary agreement between Cyprus and international lenders provides for updating the 1980's property prices by applying the consumer price index (CPI) over 1980 to 2012 and amending tax rates for the value bands.
Until now, immovable property tax was calculated based on the value of the property on January 1, 1980.
Under the new regime, the taxable figure would be the result of multiplying the value of the property in 1980 by around 3.5 ? the CPI, according to deputy land registry director Andreas Socratous
The updated value will then be taxed by applying the new rates. The first ?150,000 is tax-free. From then on: ?150,001- ?500,000 coefficient of 6 per thousand, ?500,001- ?1,000,000 coefficient of 8 per thousand, ?1,000,001 and above coefficient of 10 per thousand. ?
The tax will be levied on the total value of all the properties in a person?s name.

Source: http://www.cyprus-mail.com/cyprus/property-tax-will-kill-tourism-say-hoteliers/20121207

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