Cyprus needs a tax system transformation — Accountants Institute

“The global tax scene is changing: international tax developments include areas such as multinational corporations, green growth and the environment, the fight against aggressive tax planning, as well as technology and digital taxation,” warns Kyriakos Iordanou, general manager of the Institute of Certified Public Accountants of Cyprus, in an interview with the Cyprus Mail.

“For Cyprus to remain and excel as an international business destination, and to complement the long-term economic model being developed by the Economic and Competitiveness Council, a  a new tax framework is needed,” Iordanou says.

The current framework has served its purpose very well, according to Iordanou, but it tends to be obsolete and incompatible  with the new world order of economic affairs.

“ICPAC is proposing the inauguration of a public consultation based on a proposal that we have elaborated. The desired outcome will be to draft a new, modern, progressive and relevant tax framework, one that is geared to the desired economic model of the country and the wider international, fiscal framework.

Our suggestion is certainly not limited to the narrow level of a mere tax policy and related regulations, or to adjustments in the tax rates and levies, but also extends to operational and administrative arrangements, as well as the application of the latest technologies and e-government tools. It is for this reason that we characterise this work as a ‘transformation’ of the existing system, since in practice it means its evolution and not just its abolition and replacement,” Iordanou explains.

“We believe that the way to succeed in this endeavour should be similar to that followed by the State about 20 years ago, with the tax reform undertaken at that time. We believe that it is highly recommended to achieve harmonisation with the European Acquis, whilst summoning renowned experts in the field of taxation taking hence, the best of other thought leadership and expertise.”

This consultation process should include all the competent stakeholders of the economy, from the private and public sector,  so that the government could benefit from their experience and knowledge as well, Iordanou adds.

ICPAC  adopts a positive approach for the whole project, as does the entire accounting profession  in Cyprus.

“We declare our readiness to contribute to, and to assist in every way possible, the efforts of the government to rework the current tax system. It is an irrefutable fact that the future course of the country’s economy, its competitiveness and attractiveness, as well as its reputation, depend on the effectiveness of the tax framework and the tax regime. This will require a holistic, detailed and thorough approach, taking into account what is happening and keeping an open and horizontal perception of the whole issue,” Iordanou continues.

“There is a disposition for cuts and fundamental changes  if necessary. This is a project of national importance, which will ‘carry’ the country, its citizens and its businesses potentially  for about 20 years.

The ‘tax transformation’ should be in line with the commitments of Cyprus to the European Union in relation to its participation in the Recovery and Resilience Fund as well.

At the same time, the new tax system must take into account both social cohesion and the creation of growth conditions, facilitating citizens and businesses to operate and grow, and attracting foreign direct investments and  companies to relocate part of their business to Cyprus or have their operations done from or through Cyprus.

We do consider that the tax transformation endeavor is probably one of the most important reforms, necessary for the country.

We also anticipate that the new tax framework will strengthen fiscal stability, which is extremely important, while at the same time ensuring that it remains simple to implement, fair and promotes fiscal compliance,” Iordanou concludes.