Proposed changes to annual corporate levy spark political debate

The Finance Ministry is preparing a study to revise the laws surrounding the annual corporate levy, said a spokesperson for the Ministry of Finance in the parliamentary Trade Committee, with lawmakers allowing a few months for this to take place, stressing that otherwise relevant law proposals pending before the body will be promoted.

The issue was discussed in today’s committee meeting, with the committee’s president, Kyriakos Hadjigiannis, stating that following the postponement of law proposals by the Plenary, it was decided to provide some additional time in order to see if the government will come forward with any specific proposals. If not, the matter will be taken to the Plenary. It should be noted that annual revenues from the annual corporate levy range from €40 to €50 million.

Hadjigiannis claimed that the government is seeking delays as a form of “obstruction” of the House of Parliament’s decision. The House, he said, clearly demands that this tax be gradually abolished and that the government should make an effort to compensate for the loss of state revenue within three years. The issue is currently before the Plenary, and there are related proposals that are widely debated.

Speaking before the committee, a spokesperson from the Ministry of Finance stated that the ministry is preparing a study related to the revision of the corporate tax.

The preliminary direction of travel, he said, points toward the introduction of a progressive tax based on the company’s turnover. There will be a zero tax for inactive companies, and the tax will gradually decrease up to a certain turnover threshold and then increase.

Regarding the law proposal submitted by Akel, the Finance Ministry’s spokesperson explained that it is determined based on the company’s asset value, while the ministry’s proposal is based on the company’s turnover. He explained that a company’s turnover is more representative of the imposition of a targeted tax, as there are companies with minimal assets but a significant turnover.

As he mentioned, based on the data, the average annual revenues range from €40 to €50 million. The goal is to limit the loss to €15 million and find a way to offset these losses.

Irini Mylona-Chrysostomou, the Companies Registrar, stated that the Companies Registrar’s Department has the authority to collect the tax and apply procedures for non-compliant companies. However, she pointed out that the collection is made from all companies “in one go,” as she characterised it.

“If there are procedures that will distinguish between the sizes of companies and company turnovers, then it should be taken into account that the Companies Registrar, in terms of its responsibilities, cannot make such distinctions,” she said.

“In such a case, adjustments should be made, or the collector should change,” she added.

Many lawmakers noted that this issue has been pending since 2017 for legislation that was imposed during the economic crisis.

From Akel’s side, Costas Costa said that the issue has been discussed since 2018 and at that time, it was said that there would be a solution by September 2019.

“We should not be fooled; we want to see when this issue will be resolved. It should not take more than 2 or 3 months,” he explained.

Nikos Sykas, a Disy lawmaker, stated that this issue has been under discussion since 2017.

Former Disy president Averof Neophytou pointed out the need to simplify the entire system as part of a broader tax reform initiative.

“Will there be a tax reform, and will we continue to have 100 charges? Will we have corporate tax, dividends, stamps, and corporate tax?” he asked, adding that the House could proceed with a transitional regulation, especially for small companies.

Christos Pantelides, a Disy lawmaker, both when speaking as part of the committee and in his own statements, welcomed the government’s expressed intention and recalled that until last March, when the issue was being discussed, the Ministry of Finance’s response was that it did not wish to make changes in relation to this issue.

Moreover, he also noted that there is a grace period of several months since the next payment of the tax is due in June 2024.

Finally, Edek MP Elias Myrianthous said that this issue has been on the agenda since 2017.

“We respected the government’s position that there were issues with the budget. At this moment, with the expressed intention, a schedule must be set,” he said.

“We want to know exactly when it will be completed and when we will have it before us so that we know how to proceed,” he concluded.