Value Added in the TRNC

Years ago in the UK, in 1973 to be precise, a new tax was introduced called the Value Added Tax. It had a cheeky name because in business terms the words “value added” represents improvements to materials which increase their selling price beyond their material worth. Examples can be found from Picasso putting paint on canvas to a 5-star hotel giving top quality service. To add to this little joke, the tax was introduced on 1st April, April Fools’ Day if you didn’t know.

Tax and government go together but like charities we tend to ask how much goes towards administration and how much towards helping us. There is a special day called Tax Freedom Day, this differs from country to country and in the UK this year it was on 30th May. On that day all our income goes towards paying the 40.9% tax on our income and from then onwards we get to keep all we earn. These taxes include VAT, income tax, road tax and duty.

Tax and government are supposed to be about adding value to a country. So what does the UK do with the £548bn it raises in tax? Well, firstly, they’re going to spend £696bn and so it looks as if they are going to spend more than they raise as is the case in the TRNC [1]. What do we get for that money?  Well this is where value added comes in. In the UK we get libraries, consumer protection and a free NHS service amongst other things.

What about ex-pat residents in the TRNC? Various sources seem to indicate that they pay about the same as a Turkish Cypriot pensioner here. This comes about because currently pensioners here do not pay tax on their incomes. Bit of a surprise eh? UK pensioners, still paying UK tax on their pensions originating there, additionally pay the same tax as local pensioners.  The 2006 census in the TRNC identified 8000 ex-pats and so 4 years after the property boom it has to be closer to 12,000. Pauline Read’s article [2] showed that 10 Kulaksiz ex-pats alone brought £1m into the country so it would not be a stretch of the imagination to believe that together all ex-pats brought £1bn into a country of 250,000 inhabitants. That’s £4,000 each. They’re also probably spending £100m each year and of that £20m probably goes to the government in tax.

But what do they get in return? Where is the value added by paying taxes? Do we get an answer to a question from a Minister in the TRNC government which takes our money? Well not usually, there are plenty of examples of ex-pats with problems being ignored. Some organisations like the TRNC Consumer Association have helped ex-pats but in the area which brought £1bn into the country, the construction industry, I have to say that the money has brought little in return. But then the Turkish government probably thinks the same about their annual contribution.

Sources

[1] http://www.hm-treasury.gov.uk/junebudget_diagrams.htm

[2] http://www.northcyprusfreepress.com/2010/07/12/10-expats-pay-1m-into-north-cyprus-economy-for-nothing/

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