George Syrichas: The objectives of the tax reform and how it is progressing

By March 2024, the first six phases of the tax reform project assigned by the Ministry of Finance to the Economics Research Centre of the University of Cyprus (CypERC) will be completed and the preliminary proposals will be submitted.

This was recently confirmed to CNA by George Syrichas, economist and CypERC advisor.

Stating that the tax reform project, which is expected to be completed within two years, is ongoing, Syrichas said that Phase 2 of the project regarding green taxation and compensatory measures is currently underway and noted that estimates have already been made for the effects on households and businesses from the imposition of green taxes, for example on water, fuel, and waste.

More specifically, he mentioned as an example that something being examined is how this green taxation will impact each household depending on its income class, whether it includes children, and how many cars it owns. He noted that something similar is being done for businesses as well.

"These assessments have been made and based on the effects that have been identified we will proceed to determine the compensatory measures, i.e. what should be returned by the state to households and businesses to compensate for this adverse impact that they will have from green taxation," he underlined.

Syrichas explained that "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," as taxation should be fiscally neutral.

He added that compensatory measures could be either refunds or incentives to further accelerate the green transition (photovoltaic systems, subsidies for electric vehicles).

He also stated that all these assessments and proposals for compensatory measures in relation to the imposition of green taxation will soon be given to the Ministry of Finance to be further promoted as it is a European obligation for Cyprus and included in the Recovery and Resilience Fund to be implemented in 2024.

In addition, in relation to the rest of the tax reform project, Syrichas said that Phase 1 of the project, which deals with recording macroeconomic trends, and Phase 3, which deals with the experiences and practices of other EU member states and other countries, are running in parallel at this time and are almost complete. These two phases together with the ongoing Phase 4 which concerns the existing tax system of Cyprus, will be ready by March.

He also stated that Phase 5, which concerns the identification of relevant legislative regulations, has been completed, while Phase 6, which concerns empirical findings from other countries, will also be completed by March 2024.

He said that subsequently and around the end of January to the beginning of February, bilateral consultations will be held with all the involved bodies, among which are the Institute of Certified Public Accountants of Cyprus, the Cyprus Bar Association, the Chamber of Commerce and Industry, the Cyprus Employers & Industrialists Federation, and unions, on the progress of the work and findings.

"All these Phases, which will be ready by March 2024, will provide the basis on which we will base ourselves to start submitting proposals on what should be done specifically in Cyprus, based on the good practices, experiences that apply in the rest of the EU countries and internationally," he added.

He said that after March, a presentation will be made to all the involved bodies on the progress of the works concerning Phase 7 of the project, and the submission of the first preliminary proposals by CypERC will follow.

Syrichas told CNA that the submission of proposals concerns Phase 8 of the entire project, which is the evaluation and formulation of tax reform proposals.

He added that the objectives of the project are to have a new integrated tax system that, among other things, maintains Cyprus' position as a competitive financial centre, is simple, transparent, reduces inequalities, is efficient, is friendly to economic growth and employment, fosters innovation, supports the transition to a green and digital economy, and ensures the sustainability of public finances.

Regarding the measurement of its effects, Syrichas said that CypERC has statistical models and tools that measure any impacts on either households or businesses.

Finally, he stated that concerning the entire project, proposals are accepted, from organised groups or ordinary citizens, which can be submitted through the CypERC website.

(Source: InBusinessNews, CNA)