Economy

Cyprus tax reform open to evidence-based suggestions

By: SigmaLive English

Date:

Finance Minister Makis Keravnos told the House Finance Committee on Monday that the government welcomes well-documented proposals on the Cyprus tax reform package provided they do not dismantle the fundamental structure.

The Committee completed its clause-by-clause discussion of the reform bills. Keravnos announced that he will table amendments tomorrow.

Core principles remain non-negotiable

Keravnos stressed that certain key pillars of the Cyprus tax reform cannot be removed without collapsing the entire framework. These include safeguarding economic resilience and achieving a fairer distribution of the tax burden.

He clarified that the reform is not a social policy instrument. Issues such as increasing benefits fall under the responsibility of the Deputy Ministry of Social Welfare, which already has an €870 million budget for allowances.

Government ready to listen

The Ministry of Finance will carefully examine suggestions as long as the basic architecture of the reform stays intact. Keravnos said he follows parliamentary observations closely and believes solutions can be found for concerns raised by MPs and society.

On the proposed taxation of provident funds’ business activities, he noted that a letter from the Commissioner for State Aid Control requires thorough analysis. If no state-aid or competition issues arise, the Ministry has no reason to insist on taxation. He added that taxing a business while leaving a provident fund doing the same activity untaxed creates distortion.

Party positions

  • DIKO sees room to increase the tax-free threshold and child-related deductions, as well as interest relief on primary residence loans and rent allowances.
  • DISY will only support relief measures and will table costed amendments to further help the middle class and families.
  • AKEL insists the government proposal leaves half of society untouched by relief while facing price pressures, and calls for higher taxation of large incomes and profits.
  • ELAM demands stronger family support, higher tax-free threshold, and removal of the €80,000 family-income cap.
  • EDEK broadly backs the direction but wants more relief for lower earners and small companies.
  • DIPA proposes raising the tax-free threshold to €21,500 and introducing targeted credits for households below it.
  • Greens want a socially fairer reform with higher direct taxation to enable broader indirect-tax reductions.

Trade unions and provident fund representatives strongly oppose taxing funds’ income, arguing it would undermine the institution.

Also read: EU’s €1.2tn plan: Cyprus-to-Europe link and renewables boost

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