THIS COLUMN, on countless occasions in the past, has expressed the view that President Christofias and his people were incompetent, irresponsible and dangerous for Cyprus. Now, I am convinced that they are politically sick. Their paranoid actions, which we are witnessing daily, have as a source an incurable ideological disease.

The bill for the immovable property tax (IPT) proved emphatically that they are ruthless when they want to put into practice some of their idiotic, ideological prejudices. No argument or rational explanation could stop them; not even the awareness of the harm they would ultimately cause. All they care about is the satisfaction that they acted in accordance with their antiquated ideological beliefs.

They seized the opportunity provided by the bailout to avenge the rejection by the legislature in 2011 of a bill with the same aim – taxation of immovable property. They never accepted that the majority of the legislature prevented them from imposing this so-called ‘taxation of wealth’. So they decided to do it now, ensuring the provisions of the bill were much harsher.

So while the troika initially proposed that Cyprus should raise €20 million in property tax, the government offered to raise that revenue to €69 million. But subsequently the government drafted a bill that – if it could be implemented and property owners paid their tax dues – would have raised, according to some calculations, €200 million. I think that the amount would have been even higher as hotels would have had to pay astronomical amounts of between €200,000 to half a million euros.

The most interesting aspect of this case was the procedure followed by the government. As has been revealed, the land surveys department was not consulted. And according to information, the technocrats of the finance ministry had no involvement in the preparation of the bill. Unbelievable as it may sound, this monstrosity was created by Commerce Minister Neoclis Sylikiotis and Labour Minister Sotiroulla Charalambous in co-operation with the presidential palace.

If this is the case, it would rank as one of the most disgraceful political acts ever perpetrated in Cyprus. This version is supported by the logic that only sick minds could have mustered the ruthlessness and irresponsibility to put together such an abomination. Because, apart from causing big problems for individuals, the IPT would have worked like a mega-ton bomb that would have blown the Cyprus economy to bits. The property and construction sector is in a big mess, but increasing taxation on immovable property 10-fold now, would be the final nail in the sector’s coffin.

Tourism is the only sector of the economy that has been doing well in the last two years. A responsible government would have done everything in its power to help it as it was the only sector of the economy with real growth prospects. It would have taken measures that would have contributed to the lowering of costs so that the sector would be able to compete with other destinations, expand and create new jobs. Instead of this, the government chose to demolish it, by putting the IPT bomb in its foundations.

When the government decides to impose a tax of 300 and 400 thousand euros on a hotel that until last year was paying 50 to 60 thousand euro what would it achieve other the complete destruction of the tourist industry? Don’t you have to be sick in the mind to try to destroying the only flourishing sector of an economy in deep recession?

On September 2 of this year, referring to Christofias and his associates in this column, I had written the following: “These people are dangerous. They will cause more catastrophes before they leave.” It is exactly what they are doing now. Nothing will be left standing by the time he leaves office.

THE property sector served successive governments well as it formed a stable source of income and employment for a number of years. The sector’s importance grew from 2002 – 2007 as increased overseas demand was further fuelled by a general feeling of euphoria and by the parallel credit expansion of all local financial institutions.

The decrease in transaction volume in 2008 and the subsequent fall in prices since 2009 were both dismissed by government, banks and other “experts”. The game was lost then and there, as instead of acknowledging that the island had a problem the “collective” choose to pretend that all was well. The calls for reforming the Land Registry’s system of issuing title deeds was dismissed as being “just some English guys complaining”, the lack of due diligence in granting loans and overdraft facilities as “in Cyprus we know our clients”, and the need for increased transparency and accountability in rules and regulations by “if it works – in our favour – don’t fix it”.

The “spoils” were consumed by all as property related companies became prized clients of banks, financed football teams, and provided employment for an increased number of subcontractors and overseas workers. Frankly, no one is to blame for “taking a cut of the action”. In retrospect however we should have been more sceptical, prudent, and ethical as to where and how “the action” was taking us.

The worrying is the handling of the crisis since. There has been no reform of the Land Registry’s system of issuing title deeds (out of 430,000 residential units, a reported 130,000 do not have one), the planning regulations have become even more, and there continues to be a complete lack of enacting and enforcing regulations. There is a continuing dismissal, mainly by bankers, of calls to improve due diligence processes and an on-going questioning of the level of decrease in prices. How can anyone who works for an organisation whose share price has decreased by more than 95% in two years wonder why real estate prices decrease is truly beyond me.

The “extend and pretend” scenario has become the staple of the current government, with a continuing discussion as to who is to blame for the crisis. Frankly, no one cares. If I am unemployed (12.2% unemployment rate and rising), in negative equity (prices are down 30-40%), and the cost of living and taxes are rising (and further tax hikes in the New Year), I have more immediate concerns than to ponder why I reached that point. I need a vision, a plan and hope. Not moaning.

The recent “storming of parliament” by government workers is simply a result of politicians lacking the necessary leadership skills to explain to their constituents that because we had such a great time from 2002-2008, now it’s time to pay the bill. The easiest way to explain what that means is for you to think of your life in 2000. That’s where we, society and businesses, need to adjust to in terms of income and spending.

The country needs to decide if it’s going to going to be Greece or Ireland (in handling the crisis. Both countries are in a similar mess, but in Greece the birth rate is down as couples worry about affordability whilst in Ireland it’s up as couples spend more time together. Same problems. Different attitudes.

Postscript

A note about the recent euphoria relating to the Chinese and others buying property in Cyprus. If you are hungry you can order take-away; but if you do it too often then you end up lacking nutrients.

Unless the system is reformed the country cannot move forward. Already the first signs of discontent have been heard with Chinese complaining that they are being sold overpriced properties.

During a recent valuation, we reviewed transaction prices in a project in Peyia, Paphos. Transaction prices in 2007-2008 were at €180,000 and in 2010-2011 at €130,000. There were two entries for 2012 – at €300,000 and €320,000 respectively (the minimum to apply for a residence permit is €300,000).

Another chicken is being primed.