Over the past two years tax authorities have managed to squeeze out an additional €29.9 million from businesses playing fast and loose with their VAT receipts, MPs heard on Thursday.

The matter of enhanced tax checks on ‘high-risk’ companies came up at the House audit committee.

Christos Karoullas, the deputy tax commissioner, said the tax department has set up and is operating two units.

The first unit combs over tax returns for irregularities, and the second unit scrutinises VAT receipts.

Each year the tax department selects a number of ‘high-risk’ companies for enhanced tax checks.

In 2024 and 2025, the enhanced checks yielded additional tax revenue of €14.3 million from the unit assessing tax returns, and another €15.6 million from the unit focused on VAT.

In parliament, auditor-general Andreas Papaconstantinou cited a prior report by the Audit Office, which had urged tax authorities to focus on ‘high-risk’ businesses operating in Larnaca’s Mackenzie area.

Maria Pavlou, a functionary at the Audit Office, said they had tracked issues with VAT with businesses where food is served at tables.

These businesses are eligible for discounted VAT. However, it was discovered that businesses that do not serve food at tables also claimed – and got – discounted VAT.

The affair came to light when a company playing by the rules filed a lawsuit, alleging unfair competition – namely that businesses not serving food at tables were cheating and benefiting from the discounted VAT.

The company won the lawsuit in 2019.

In another case, a business had been flagged for VAT irregularities all the way back to 2014, but had apparently managed to get away with it.

This same company had organised around 30 events, for which no VAT was calculated. In one instance, it organised a concert drawing a crowd of 3,000 – but paid no VAT.

In general, said Pavlou, there are serious shortcomings relating to taxing entertainment events taking place in the Mackenzie area.

Coming back, Karoullas said the tax department has set up a register of entertainment events to monitor the situation.

In 2025 alone, 200 entertainment events were selected for tax checks. They were selected based on advertisements in mass media and social media. The tax department has assigned a dedicated functionary to handle this issue.

Chiming in, the treasurer of Larnaca municipality corroborated that unlicensed entertainment events are “a headache” for local authorities.

He said the municipality has a difficult time tracking these events, and often has to learn about them from media.

For her part, Akel MP Irene Charalambidou pointed out that the tax department is understaffed – there are about 100 positions vacant.

She said the department should be given all the means to crack down on tax evasion.

“We see entertainers getting paid in cash and then departing Cyprus, or nightclubs who overcharge for their services.”