Cypriot Finance Minister Constantinos Petrides lashed out at critics this weekend, saying his country was in favor of setting a global minimum tax for corporations despite not having signed on the dotted line.
Petrides took to Twitter on Saturday night to set the record straight on why Cyprus was not among the 136 countries that had signed last Friday a ground-breaking tax deal hashed out by the Organization for Economic Co-operation and Development.
“Cyprus is not an OECD Member because of Turkey’s objection. We tried to join the OECD Inclusive Framework but again Turkey objected, so we couldn’t be part of the list,” the minister wrote on Twitter.
The statement was a direct response to another comment a day earlier that said it was “time to shame Cyprus” and “why not join the OECD tax deal?” referring to an agreement on global tax reform.
“Cyprus supports a global tax deal!” Petrides added in his reply.
Nicosia welcomed the deal 'marking long-term efforts aimed to create fair and healthy competition on a global scale as well as safeguard the tax bases and public revenues of economies'
An official statement said Nicosia welcomed the deal “marking long-term efforts aimed to create fair and healthy competition on a global scale as well as safeguard the tax bases and public revenues of economies.”
But Petrides, who said Cyprus was aligned with the two pillars of the OECD plan, has yet to agree on specifics.
“We will participate actively and constructively in the committees with the EU for the ratification of a global minimum tax rate,” the minister said in a follow-up tweet.
Under Pillar one, a country’s right to tax a multinational firm will be more based on the company’s revenue sources in end market jurisdictions rather than tax rules at its physical location, while pillar two calls for a minimum corporate tax of 15%.
According to an official statement, Nicosia was not in a position to take part in global consultations over this issue “as it is neither a member of OECD nor a member of the Inclusive Framework due to objections by a member state of the organization,” understood as a reference to Turkey.
“However, the Finance Ministry is in line with the principles governing the two-pillar plan, as those were recorded in yesterday's statement issued by OECD, which will be finalized and sealed at the G20 meeting on 13 October 2021,” the statement said.
Nicosia seeks active role in talks at EU level
Nicosia aims to use next week’s G20 decisions as a basis for the development of legislative initiatives within the European Union expected to take place next year.
But Petrides made headlines over the summer when he declared “taxation matters were a national competence and efforts going on at global and EU level risked undermining this principle.”
During a Q&A session of the EU parliament committee on Economic and Monetary Affairs, the Cypriot minister had told members in June that Nicosia was in favor of retaining the policy of setting the tax rate as a national competency, arguing European capitals ought to maintain a “level of corporate tax rate suitable for the sustainable development of the economy and investments.”
According to experts, the two-pillar plan in its current form would allow countries to run exclusions that can favor certain companies in sectors such as mining, shipping, and regulated financial services.
EU wants unity against tax avoidance & evasion
On Friday, European Commission President Ursula von der Leyen said Brussels would work closely with member states to “ensure that the EU moves forward in a united manner.”
An official statement on Saturday said Cyprus’ finance ministry would remain positive in setting up an EU legislative framework that would provide for the introduction of a global tax rate at 15% “and in so doing safeguard a healthy competition framework and fair taxation.”
After the finalization of the agreement next week during a G20 summit, technical details are expected to be hammered out next year including an implementation plan, model legislation, guidance, and a multilateral treaty.
“Then, we need to implement it,” said von der Leyen.
“In parallel, we will continue to crack down on tax avoidance and evasion. Because we have to ensure that everyone pays their taxes in an equitable way. We owe it to our citizens,” she added.
The actual implementation is not expected to begin before 2023.