Cyprus tax reform targets green initiatives and economic revitalization

By March 2024, the initial six phases of the tax transformation project commissioned by the Ministry of Finance to the Centre for Economic Research of the University of Cyprus will conclude, with the submission of preliminary proposals to follow, according to CER economist George Syrichas, a member of the project's advisory committee.

The ongoing tax transformation project, expected to span two years, is currently progressing with Phase 2, focusing on green taxation and compensatory measures. Syrichas revealed that assessments have been conducted to estimate the impact of green taxes, such as those on water, fuel, and waste, on households and businesses. The impact is being evaluated based on income class, family composition, and vehicle ownership for households, and similar considerations are made for businesses.

Compensatory measures, aimed at offsetting the adverse effects of green taxes, are being explored. The state aims to ensure budget neutrality, with revenue generated from green taxes being returned to households and businesses through reimbursement or incentives, such as subsidies for electric vehicles or support for the adoption of renewable energy like photovoltaic systems.

Syrichas emphasized that these considerations and proposals for compensatory measures related to green taxes will be presented to the Ministry of Finance, aligning with European obligations and the Recovery and Resilience Fund to be implemented in 2024.

Progress on other aspects of the tax reform project includes the completion of Phase 1 (mapping macroeconomic trends), Phase 3 (analyzing EU and international practices), and Phase 5 (identifying relevant legislation). The ongoing Phase 4 examines Cyprus' existing tax system, and Phase 6, focusing on empirical findings from other countries, is slated for completion by March 2024.

Bilateral consultations with stakeholders, including the ACLG, Cyprus Bar Association, CCBE, OEB, and trade unions, are planned for late January to early February. These consultations will provide an opportunity to discuss progress and findings.

Syrichas anticipates that by March 2024, the completion of these phases will form the basis for making specific proposals for Cyprus. The subsequent phases will involve presentations to stakeholders, leading to the submission of preliminary proposals by the Centre for Economic Research, addressing the broader tax reform objectives.

The overarching goal of the project is to establish a new comprehensive tax system for Cyprus that remains competitive, is transparent, reduces inequalities, promotes economic growth and employment, supports innovation, facilitates the transition to a green and digital economy, and ensures the sustainability of public finances.

The Centre for Economic Research encourages contributions from organized groups or individuals, which can be submitted through the CER website.

[Information sourced from KYPE]