Cypriot taxman to pursue unpaid taxes from Church

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Reuters, Thursday June 5 2008
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NICOSIA, June 5 (Reuters) - Cyprus tax authorities said on Thursday they would expedite collections of unpaid dues to the state this year, including those it said were owed by the island's powerful Greek Orthodox Church.

Overall, the state is owed 490 million euros in unpaid taxes and the church itself owes a "considerable" amount, Finance Minister Charilaos Stavrakis said.

"It is well known the Church has some business ventures and has considerable tax issues pending with the state," Stavrakis said.

Cyprus is eyeing a surplus equalling 0.5 percent of its gross domestic product this year, following a 3.3 percent surplus in 2007. In comments to Reuters earlier this week Stavrakis said the 2008 target had become a challenge, because of global financial turmoil and steep costs of importing water to the drought-stricken island.

Stavrakis would not disclose how much the Church owed in arrears. The Church has a wide range of business interests including stakes in a bank, real estate and a brewery.

"There is a political dimension to this issue. The Church is a very important institution in Cyprus, but we are going through an economic crisis and everyone should contribute ... I believe that where the church has tax obligations they should be settled as soon as possible," Stavrakis told journalists.

Although the Church and the state had reached an understanding that its commercial activities should be taxed, there was a legal wrangle on what constituted a commercial activity and a dispute about how much was owed to the state, individuals familiar with past discussions told Reuters.

Stavrakis said one of the options to expedite tax collection included changing the method of capital gains tax calculations on real estate transactions.

Authorities planned to submit legislation to parliament and include measures in the 2009 budget to reduce tax evasion, Stavrakis said. (Reporting by Sarah Ktisti, writing by Michele Kambas, editing by Stephen Nisbet)

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