Audit Office Questions Ex-Presidents’ Untaxed Allowances

Scrutiny Over Allowance Payments to Former Cypriot Officials Intensifies

The Audit Office of Cyprus has raised concerns over the practice of paying a ‘personal secretary’ allowance to former presidents and House presidents, highlighting potential issues with the system. The government watchdog has even suggested that it may refer the case to the anti-corruption authority if immediate corrective measures are not implemented by the government.

This issue came under the spotlight after the finance ministry affirmed last week that the allowance system would persist without changes. The allowance, originating from the era of the late president Spyros Kyprianou in 1988, has been scrutinized for inconsistencies in its application. The Audit Office revealed that some former officials claim the allowance without actually hiring a secretary, and in one instance, the designated secretary was self-employed.

Adding to the complexity is the tax treatment of these allowances. For former presidents, this allowance is not taxed as it is not deemed part of their income, creating a disparity since MPs’ secretarial allowances are taxed. The auditor-general pointed out that there is no uniform policy regarding taxation.

According to legislation amended in 2005, MPs are entitled to an annual secretarial allowance of 7,200 Cyprus pounds, equivalent to €12,300. Despite this, the finance ministry’s permanent secretary conveyed to the auditor-general that there is no mechanism to verify the earnings of these private secretaries since they are not on the civil service payroll.

Earlier in March, the Audit Office urged the finance ministry to adhere to legal provisions, recommending the cessation of allowance payments where conditions are not met. They also suggested that for any misallocated funds, the finance ministry should seek tax receipts from former state officials.

The Audit Office plans to conduct further investigations following April’s payment cycle to these ex-officials. They stated, “In the event we ascertain that any person has acted in a way that may constitute abuse of power, we shall duly inform the anti-corruption authority.”

Allowance
Yes, the 'personal secretary' allowance for ex-presidents is subject to federal income tax as it is considered taxable income under U.S. tax laws.
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