A special audit report on the Tax Department (TD) was conducted by the Audit Office.
The Office carried out a review of a sample of transactions by the Tax Department for the year 2023, focusing both on the proper reflection of the state’s financial statements and on the Department’s compliance with legislation.
The key findings from the audit are as follows:
Significant revenue increase
The reduction in outstanding taxes contributed to a substantial increase in state revenues from €4.6 billion in 2021 to €6.9 billion in 2024.
Weaknesses
There is an accumulation of delayed revenues amounting to €3.1 billion as of 31 December 2023, of which around €1.4 billion is at risk of not being collected—mainly due to the Department’s failure to take timely and effective collection measures.
The notable reduction in outstanding taxes was achieved without substantive audits or income adjustments, potentially at the expense of revenue. Instances were also noted where taxes were imposed beyond the legal deadline for reassessing tax liabilities, indicating underutilisation of the powers granted by relevant legislation.
The TD failed to conduct sufficient audits of companies with significant transactions, profit margin discrepancies, or major differences between declared turnover for direct and indirect taxation purposes. There was also an absence of a reconciliation mechanism between subsidiary systems and the accounting system FIMAS, resulting in the inability to verify the completeness and accuracy of revenue, especially concerning VAT.
Η Ειδική Έκθεση "Έλεγχος Τμήματος Φορολογίας" ετοιμάστηκε από την Υπηρεσία μας και βρίσκεται στην ιστοσελίδα μας:https://t.co/g8lOzBQlQV pic.twitter.com/Xz7uKILeec
— ΕΛΕΓΚΤΙΚΗ ΥΠΗΡΕΣΙΑ (AUDIT OFFICE OF CYPRUS) (@Audit_Office_Cy) July 29, 2025
Additionally, delays were observed in remitting funds related to third parties (e.g. OSS, GHS), with no relevant clarification provided in the financial statements. There were also incorrect classifications of income from overpayments, affecting the accurate presentation of revenues in the statements.
Furthermore, interest was paid to taxpayers contrary to legislation; there was inadequate monitoring of VAT receipts collected on behalf of other countries, and tax refunds were issued without checks for potential outstanding debts.
Public contribution
The significant contribution of citizens in combating tax evasion through submitted reports was noted.
Tax Department’s attitude
The positive stance of the Tax Commissioner, both in providing data to the Audit Office and in investigating the matters raised, enhanced the effectiveness of the audit process.
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