New tax system to maintain Cyprus as competitive financial centre

The economist overseeing the project for the finance ministry announced on Friday that preliminary proposals for changes to the tax law will be submitted in March 2024, following the completion of all initial studies by that time.

Speaking to the Cyprus News Agency, the Economic Research Center (CypERC) of the University of Cyprus’ Giorgos Syrichas said they relate to the first six phases of the tax transformation project.

He said they are the result of detailed assessments of the effects on households and businesses on the introduction of green taxes, including those on water, fuel, and waste.

The centre is looking into how green taxation affects households based on income, number of children and ownership of cars. Similar assessments are being carried out for businesses.

“The state will have revenue from the imposition of green taxation, for example on water and other services, and this revenue should be given back,” Syrichas added.

Compensatory measures could be in the form of refunds or incentives, such as subsidies for electric vehicles, to speed up the transition to greener practices, including the use of solar panels.

Discussing the broader tax reform project, Syrichas said Phase 1, focusing on recording economic trends, and Phase 3, examining experiences in the EU and other countries, are almost done. Additionally, Phase 4, which deals with Cyprus’ current tax system, is ongoing. Phase 5, identifying relevant laws and regulations, has been completed, and Phase 6, which looks at findings from other countries, will also be finished by March.

After March, there are plans for a detailed update on Phase 7, followed by the submission of the first preliminary proposals. Syrichas clarified that the proposals fall under Phase 8 of the project, which covers the assessment and development of tax reform proposals.

When measuring the effects, Syrichas pointed out the use of statistical models and tools to understand how households and businesses are impacted. The university centre encourages proposals for the entire project from organised groups or citizens. Submissions can be made through the centre’s website.