Cyprus’ local authority reform will increase costs for the state; however this is to be expected until everything falls into place, the House audit committee heard on Thursday.

Presenting the fiscal report for 2022, Cyprus’ accountant general Andreas Antoniades highlighted that in the first few years after local authority reform is implemented, costs will jump from €109 million to €118m in 2024.

In 2025 and 2026, the figure is expected to amount to €140m.

“This is logical because when you built a new foundation, a reform requires frequent costs until things settle.” Nonetheless, Antoniades specified the results must be combined with income flowing in from the reforms of the local authority.

Overall, in 2022, revenues amounted to €8.04 billion while expenditure reached €8.2bn with the final balance (before net inflows due to borrowing) showing a deficit of €0.9 bn compared to €1.5 bn in 2021.

Antoniades added tax revenues in 2022 accounted for 82 per cent of total state revenues and amounted to €6.8 bn, with VAT revenues amounting to €2.54 bn (€2.15 bn in 2021). Meanwhile, corporate tax revenues increased to €1.44 bn, while personal income tax amounted to €1.17 bn.

The accountant general presented to MPs data on the number of civil servants, saying that after the reduction of both the number and the state payroll (pensions and salaries), from 2016 and 2017 there was an upward trend, reaching 53,400 civil servants at the end of 2022, at a total cost of €2.9 bn.

“The good news for 2023 is that we have a reduction,” he said, adding that it is estimated that the number of civil servants will fall to 52,000.

Addressing the cost of hosting Ukrainian refugees following Russia’s invasion of the country, Antoniades noted the total cost is expected to reach approximately €50m including costs until March 2024.

He said that in 2022, the cost of accommodation amounted to €10m, while in the first half of 2023 the cost amounted to €17m, recalling a Cabinet decision to approve another €21.5m covering a period until March 2024.

MPs questioned whether Cyprus receives any support from the EU, with a finance ministry spokesperson noting that the deputy tourism ministry has received funds from the EU.