British Residents Society, North Cyprus - GOVERNMENT LIAISON DETAIL

GOVERNMENT LIAISON DETAIL

This page last updated 11/04/2007

	Detail
27/12/2004	Letter from BRS to Prime Minister, Lefkosa, TRNC Purchase of property by foreigners in the TRNC

Mr.Mehmet Ali Talat

Prime Minister

Prime Minister’s Office

Lefkosa

27^th December 2004

Dear Mr. Talat,

Purchase of Property by foreigners in the T.R.N.C

I am writing to you concerning the recently reported proposals to increase the tax on the sale of property to foreign nationals.

In doing so I should point out that this letter comes to you not merely in a personal capacity, but with the full authority of the Committee of the British Resident’s Society which is the representative body of more than 90% of the foreign nationals living in North Cyprus.

In recent weeks the Society has actively campaigned against the proposed Leasehold Bill. It is, of course, pleased to hear of your decision to abandon this Bill and is greatly encouraged by your obvious willingness to listen to the arguments against this proposal and your political courage and honesty in deciding to abandon it. However, this new proposal to increase the tax on the sale of property to foreigners appears to again raise two issues of principle to which the foreign community so vehemently objected to in the proposed Leasehold Bill. These concern the discriminatory nature of the proposals and the effective date of their implementation.

It is understood that the proposed tax changes are considered necessary in order to partially recover loss of government revenue arising from the abolition of K.D.V on a range of foodstuffs, educational and medical equipment. The abolition of K.D.V in this context is, no doubt, a sound financial decision which will benefit the whole community. It seems however that the Government expects it to be mainly paid for solely by foreign nationals since the proposed substantial tax increases (of the order of 10%-15%) will apply only to the sale of property to this sector of the community. This is clearly discriminatory and will be strongly resented by the foreign community. It is suggested that the Governments need to raise tax revenues from alternative sources would be more sensibly, and fairly, directed towards those sectors of the community which have benefited most from the recent growth in the economy, notably those associated with land sales and the construction and allied industries.

It should be pointed out that the timing of such a proposal could hardly be less opportune. The Leasehold Bill itself, although now abandoned, has caused considerable concern and uncertainty about the Government’s attitude towards, and treatment of, foreign nationals. You, yourself, have publicly acknowledged that the Bill has had a negative impact on the economy of the T.R.N.C To now put forward such discriminatory tax changes will only fuel concern and uncertainty and will be viewed as further evidence of the growing gap between your public expressions of support for the foreign investment and skills needed in the T.R.N.C and the actions of your Government to encourage this. Moreover, although the position of the T.R.N.C Government viz-a-viz the European Union is presently unclear there can be little doubt that this discriminatory approach to taxation is incompatible with that of the European Union.

Turning now to the issue of the date of implementation of the proposed tax changes. As you will be aware, there is a considerable backlog of applications for approval to purchase properties, some of which have been in the pipeline for a year or more. It seems likely, therefore, that due to a delay which is the sole responsibility of your Government, a large number of foreigners will now be subject to the additional expense arising from these tax changes.

As the Society pointed out in its submission on the proposed Leasehold Bill, in most democratic states, if not all, the constitution either by law or by convention, frowns upon the practice of introducing changes that are retroactive. In the interests of fairness and equity it is obviously desirable that whatever terms purchasers have contracted to acquire their properties upon, should continue to be honoured, the more so when the barrier to the completion of the transaction has been beyond the control of the parties as is the case here.

When this problem was raised in the context of the proposed Leasehold Bill, the Minister of the Interior gave an undertaking that there would be no retroactive problem as all outstanding applications to purchase would be processed by the end of December 2004, that is, before the effective date of the implementation of the Bill. He has now clearly stated that this position no longer applies as the Bill has been withdrawn. This, in itself, will be seen as a somewhat cynical and insensitive position to adopt as the issue of the backlog of applications for permission to purchase is becoming a source of considerable friction.

It seems, therefore, that there is a very distinct possibility that all those applicants whose permission to purchase has not yet been granted will be required to pay the increased tax rates on their purchase. This, it is submitted, would be grossly unfair. The Society would, therefore, urge you most strongly to exclude any applicants currently awaiting permission to purchase properties from these tax increases, and to give immediate and effective attention to eliminating the very serious backlog of applications for permission to purchase properties.

To conclude the Society makes this submission in a genuine attempt to be helpful and constructive. It hopes the Government will receive it in the same manner and give due consideration to its content. I should add that there is a great sense of goodwill towards the T.R.N.C amongst the membership of the Society. This is reflected in the work its Management Committee has undertaken to promote the cause of the country, two recent examples of which are enclosed purely for your information. The Society does not want this goodwill to be eroded and is willing to assist the Government in any way it can to prevent this happening.

Yours sincerely,

ALAN ALDRIDGE

For and on behalf of the Committee

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