Cyprus’ legal and accounting bodies have reiterated their concerns over a government proposal that would allow the tax department to seal business premises for serious non-compliance, saying the measure is disproportionate despite added safeguards.

The bill, due for detailed examination on Friday by the parliamentary finance committee, was revised over the summer after consultations between tax commissioner Soteris Markides and professional groups.

As mentioned in Philenews, under the latest draft, the tax inspector will issue three registered notifications, each giving a ten-day window for compliance or settlement, before any sealing order is implemented.

However, the Cyprus Bar Association has asked parliament to scrap the provision altogether, arguing that the procedure “is not legally correct and operates to the detriment of businesses.”

Likewise, the Cyprus Institute of Certified Public Accountants (Selk) pointed to sections of the legislation that would allow a tax inspector to close a business initially for ten days and then extend the measure by a further twenty.

The grounds include failure to submit tax returns for two years, failure to file twelve monthly employer statements, non-payment of tax above €20,000, failure to issue invoices and receipts, and obstructing a tax audit.

According to the bill, Selk noted, the inspector must have sent three notifications in advance, each offering ten days to comply.

Accountants also stressed that only Greece and Bulgaria employ similar enforcement measures in the EU, and even then solely for indirect-tax breaches.

They said that in Greece the practice has been in place since 2022 for “violations of non-transmission of retail sales data”, while in Bulgaria it applies to VAT violations, not direct taxation.

Moreover, they argued that VAT legislation already gives inspectors broad investigative powers, including access orders, and maintained that “issues of audit obstruction do not fall under tax law.”

They said the proposed sealing is unjustified, particularly for taxpayers who submit audited accounts, and that the 10+10+5-day compliance periods are unrealistic.

“So the result of the sealing will be that the taxpayer will not have access to his records in order to be able to comply,” they added, noting that numerous other mechanisms already exist to enforce filing and collection.

Even so, the tax department defended the proposal, saying the measure is necessary to safeguard public revenues and prevent unfair competition against compliant businesses.

In an information note sent to political parties, it said the seal carries a deterrent effect because “the measure is effective in strengthening tax compliance because the seal is a visible measure by the public, customers and other businesses who see the tax department acting immediately and strictly, without tolerance for the violation of tax obligations.”

It also argued that consistent taxpayers should see that “those who violate the law do not benefit at the expense of consistent businesses,” adding that this helps restore a sense of fairness and “contributes to cultivating a culture of tax compliance.”