Nicos Chimarides: Tax reform aims to modernise the tax framework, without negatively impacting taxpayers

Nicos Chimarides, President of the Institute of Certified Public Accountants of Cyprus (ICPAC), elaborates on the evolution of the accountancy profession in the country and steps being taken to attract new blood, and describes how the Institute is working with the Government to ensure compliance with international sanctions and maintain Cyprus’ competitiveness as an attractive destination for international business.

How has the regulatory compliance framework in Cyprus evolved since the financial crisis that hit the island in 2013?

In line with global developments, the regulatory compliance framework in Cyprus has evolved significantly during the past decade. Indicatively, there is stricter regulation in relation to anti-money laundering (AML), in line with the EU AML Directives. Furthermore, Cyprus has aligned its AML/CFT framework with the Financial Action Task Force (FATF) recommendations.

The law regulating companies providing Administrative Services and Related Matters was fully implemented to regulate and supervise the services offered by Administrative Service Providers (ASPs). The Implementation of Provisions of Resolutions or Decisions of the United Nations Security Council (Sanctions) and the Decisions and Regulations of the Council of the European Union (Restrictive Measures) Law of 2016 (Law 58 (I) / 2016) (Sanctions Law) are fully applicable. It should be further noted that Cyprus is currently in the process of setting up a National Sanctions Implementation Unit (NSIU).

All supervisory authorities have established fully functional monitoring departments to supervise on a risk basis all licensed obliged entities and the significant improvement made is evident through country assessments by institutions like Moneyval, which evaluates the compliance and effectiveness of the country for AML/CFT purposes.

The much closer coordination that now exists between competent and supervisory authorities allows for a more immediate identification of emerging threats and exchange of information and for recommendations to the Government for the better implementation of the law.

How has ICPAC itself evolved during this time?

ICPAC has moved fast to set up a designated monitoring and compliance department to supervise and support obliged entities. It has also increased its human and technological resources to meet growing regulatory requirements. ICPAC engages ACCA to perform its off-site full scope monitoring, both to retain independence but also to take advantage of ACCA’s knowledge and experience. Furthermore, ICPAC issued the AML/CFT Directive and the Sanctions Directive, which have the effect of secondary legislation, supplementary to national legislation.

We issue circular and guidance notes to increase awareness and support obliged entities in their efforts to ensure compliance, and we also provide training programmes and seminars to support all members and obliged entities in fully discharging their legal and regulatory obligations. ICPAC is part of the Advisory Authority for Combating Money Laundering and Terrorist Financing and we have introduced a specialised AML/CFT Certification programme for Compliance Officers working in licensed firms.

Will the ongoing tax reform help attract more foreign investors to the country?

The tax reform is a very important government initiative that aims to modernise and simplify the tax framework, without negatively impacting taxpayers. An attractive tax system is a very important tool in the effort to attract foreign investors and we therefore need to maintain it and improve it further but it is by no means the only or even the most important factor that foreign investors take into consideration.

A stable, robust and growing economy is extremely important to foreign investors and, furthermore, a strong Cypriot economy supports initiatives that can make Cyprus more attractive to foreign investments. Extremely healthy GDP growth, along with other positive economic indicators, confirmed by rating agencies’ upgrades of the Cypriot economy, allow realistic optimism. As for additional measures required, it is imperative that we improve the not always positive image and reputation of the country; many good ideas to address this issue have been put on the table and many of them are now being implemented.

We also need to improve the infrastructure that supports foreign investors, fight corruption, reduce bureaucracy and introduce efficiencies through the digitalisation of government services. An immediate action is to ensure that FDI screening legislation, which needs to be enacted in Parliament by the year end, is practical, effective and business-minded.

How are you coordinating with the Government to meet regulatory standards at a time when Cyprus is affected by international sanctions against Russia?

ICPAC cooperates very closely, not only with the relevant authorities of the Ministry of Finance but also with all other supervisory authorities in the area of sanctions. We assist with reporting requirements and are in continuous discussions with regard to designations. ICPAC monitors its obliged entities for their compliance with the Sanctions Laws and the Institute’s sanctions regulations. It offers a number of training programmes to all its members as well as to government personnel. In addition, ICPAC has issued a number of guidance notes and notifies members of new listings and updates on sectoral sanctions. The Institute also cooperates closely with law enforcement agencies on cases of suspected breaches or circumvention of sanctions.

I should also mention that we are currently in discussions with the Ministry of Finance, the Cyprus Bar Association, the Cyprus Securities & Exchange Commission, the Cyprus Fiduciary Association and other stakeholders on the setting-up of a new national supervisory authority, as announced by the Government, to ensure that Cyprus has the appropriate institutional structures in place that are proactive and responsive enough to tackle the continuously evolving threats in the AML space as well as policy responses to those challenges.

Green taxation can play a crucial role in advancing environmental objectives and milestones by imposing levies on polluters while incentivising environmentally friendly practices and behaviours. How will such a tax reform affect Cypriot businesses and is the economy ready to meet the goals set out in the European Green Deal?

The European Green Deal is the EU’s growth strategy, consisting of a package of policy initiatives, which set the EU on the path to a green transition, with the ultimate goal of reaching climate neutrality by 2050. Within the Green Deal, green taxation plays an active and positive role in support of other EU climate and energy policies.

The Government is aligning Cyprus’ tax policies with the goals of the European Green Deal, within the framework of the promoted green tax reform, which is expected to contribute to achieving Cyprus’ own climate goals and, at the same time, to help address some of the distortions in the economy by changing habits in the polluting sectors of transport, energy and water, while also significantly promoting the circular economy. Green tax reform is expected to boost innovation and green investments in the energy sector, in environmental protection and waste reduction. As such, with the appropriate government incentives and encouragement, the cost of green taxation can turn into an investment that will be net positive for Cypriot businesses.

Has ICPAC deepened its cooperation with international entities like the US to meet new standards in combating financial crime?

ICPAC has indeed deepened its cooperation with international entities. The US and UK governments have provided technical and educational support in the form of training to internal teams of ICPAC as well as offering open training sessions to ICPAC members. Roundtable discussions have also taken place, exchanging best practices and procedures. ICPAC is also part of Accountancy Europe, a body that unites 49 professional organisations in 35 countries, representing one million qualified accountants, auditors and advisors, and plays an active role on a number of committees set up by Accountancy Europe, where updates on national policies and legislation are presented. Through Accountancy Europe, a closer relationship has been established with the European Commission. Finally, ICPAC is invited to many European Commission EGMLTF (Expert Group on Money Laundering and Terrorist Financing) meetings, enabling us to learn and, at the same time, contribute with the deep expertise and experience we have in these areas.

What does ICPAC offer newly qualified accountants and how does it attract others to choose a career in the profession?

Following a firm strategic commitment from its Board, ICPAC has classified promoting the attractiveness of the profession as an issue of strategic importance. As such, resources have been allocated to this focus area, which has been embedded in our daily operations through a series of actions targeting tertiary/secondary education and the general public.

Indicative actions include the signing of MoUs with universities and other educational institutions, involvement in research work performed by related university departments, consultation with educational institutions on their curricula, holding Open Info Days with presentations and orientation to potential students and parents, participating in career fairs and similar events, building awareness amongst career advisors especially in high schools, promoting the profession’s activities via publications, social media and other digital channels, holding roundtable discussions, conducting surveys and more.

ICPAC is also actively engaged in discussions with IFAC, Accountancy Europe and other professional accountancy organisations (PAOs) on the matter, exchanging views with professional accountants across the globe on how to further promote our profession and make it more appealing to potential accountants. ICPAC was invited by IFAC to present a webinar on the matter to 132 PAOs in the MENA region and to illustrate the actions it has taken, and the Institute was recognised as a Role PAO – in fact, certain PAOs have requested ICPAC to act as their advisor on how to implement similar actions in their regions.

This interview first appeared in the November edition of GOLD magazine. Click here to view it.