Fiona McKergow: New Cyprus-Australia Double Taxation Treaty negotiations anticipated in 2024

In a recent interview with GOLD magazine, the Australian High Commissioner to Cyprus, Fiona McKergow, discusses the various initiatives aimed at boosting economic relations between the two countries, Australia’s recent decision to terminate its ‘golden visa’ schemes, and the manifold similarities between the two cultures, including a shared love of barbecue.

She was speaking as part of the GOLD magazine’s February Cover Story, featuring 11 heads of diplomatic missions in Cyprus.

Let’s start with trade relations: Australia’s two-way goods and services trade with Cyprus was valued at a modest $265 million in 2020. What are the major products being traded between the two countries?

Two-way trade in goods trade favours Cyprus very much, with exports to Australia dominated by cheese and curd products (AUD$20.4 million/€12.4 million). Australians love cheese and, as a great barbecuing nation, we love halloumi on the BBQ! After halloumi, we also import alcoholic beverages and veterinary medicines. In contrast, Australian exports to Cyprus (valued at AUD$7.2 million/€4.4 million) are dominated by manufactured goods such as telecommunications equipment, specialised and electrical machinery. One of the challenges we have is that while I see Australian produce on the shelves – even my favourite vegemite – much of it comes in via European distributors. The High Commission is working with the Cyprus Australia Business Association (CABA) and the Cyprus Chamber of Commerce and Industry (CCCI) to see how we can promote greater economic engagement and activity between the two countries. The above numbers do not include the services sector, where we see an increasing trend of Australian financial companies working through Cyprus.

Can you provide an update on the status of the Double Tax Treaty talks between the two countries and its potential impact on expanding the trade relationship?

In November 2022, the Australian Government announced an expansion of the tax treaty network as part of efforts to boost international trade and investment, provide improved certainty to taxpayers, and guard against tax evasion and avoidance practices. New negotiations on a Double Taxation Treaty will commence later in 2024. This is an exciting initiative and I expect it to deliver dividends for Australian businesses looking to move to Cyprus. The island represents an attractive place to establish an Australian-owned, EU-based business due to its proximity to the MENA markets, and Cyprus provides a democratic, stable business environment that has a familiar common law system and an attractive lifestyle.

Following extended negotiations, discussions between the EU and Australia to formalise a Free Trade Agreement collapsed last year. Can you offer insights into the reasons behind this breakdown?

Firstly, I’d like to emphasise that Australia was committed to concluding a deal. Australian negotiators were incredibly disappointed not to be able to finalise a deal with the EU in October 2023, having worked hard to deliver an agreement that benefited all parties, including smaller countries like Cyprus. The economic case for a trade agreement with Australia remains strong. Australia is the world’s 12th largest economy – a high-income market of 26 million people with a strong demand for EU goods and services, with significant potential for growth. EU modelling found that a Free Trade Agreement could increase EU exports to Australia by 33% by 2030. But there are also broader strategic and political reasons for a trade agreement with Australia. Regional conflicts and their disruption to trade and supply chains remind us all of the importance of working with reliable and like-minded partners. Australia was willing to make a strong offer on geographical indications – an important focus for Cyprus – but only if the EU was willing to lift its overall ambition, be more targeted about sensitive products, and only seek to address actual commercial sensitivities with Australia.

Australia recently terminated its ‘golden visa’ scheme and Cyprus discontinued its own programme four years ago. What were the reasons behind that decision?

To meet the future needs of the nation and deliver for all Australians – its people, businesses, governments and migrants – the Government needs to ensure that our approach to migration is fit for purpose. In December 2023, the Australian government released its new Migration Strategy which set out significant reforms to the country’s migration system. Amongst the changes was the cessation of the Significant Investor Visas (SIV) class of visa. This visa type was established in 2012 and aimed at driving foreign investment and innovation, with SIV candidates required to invest more than AUD$5m (€3m) in Australia to be eligible. On evaluation, the SIV scheme failed to meet its core economic objectives and outcomes for Australians. Consequently, a decision was made to replace SIVs with more visas for “skilled migrants” who are capable of making outsized contributions to Australia.

Given Australia’s emphasis on renewable energy, reportedly generating 30-35% of its power from renewable sources, and Cyprus’ efforts to diversify its energy mix, do you see this as a potential avenue to expand investment opportunities between the two countries?

Australia has a wealth of relevant experience in the uptake of renewable energy technologies and also experience in opening energy markets to competition. Reducing dependency on fossil fuels is a significant transition and Cyprus needs to have the strategic confidence to take the hard decisions which will require change and reforms. Diversification and market competition in the energy sector (for both energy producers and distributors) can be a good thing as it brings greater choice for the consumers but this also requires moving away from historical monopolies and inefficient practices. Cyprus appears to be at a critical junction in terms of its energy strategy and choosing which energy pathway it intends to take.

Beyond energy, in which other sectors do you see significant investment potential between Australia and Cyprus?

Our circular economy is relatively strong and there are possibilities for investing in new technologies for addressing Cyprus’ waste challenges, such as the University of New South Wales’ SMaRT micro-factories which are turning household waste into commercially viable products. Likewise, Australia also has strong experience in whole-of-government coordinated digitisation for public sector service delivery and social sector reforms.

The enduring bond between Australia and Cyprus is deeply rooted in the significant Cypriot diaspora in Australia – the second largest after the UK. Against this historical backdrop, could you elaborate on the initiatives you have led in Cyprus to promote Australian culture?

In 2023, commemorating 50 years of diplomatic ties between Australia and Cyprus, the Australian High Commission in Cyprus actively promoted Australian culture, highlighting our multicultural heritage from First Nations to contemporary Australian society. We showcased the Jarracharra: Dry Season Wind indigenous textile art from the Bábbarra Women’s Centre in Australia’s Northern Territory, and the bark art exhibition, From a Continent to an Island, in Nicosia and Limassol. Our commitment to women’s issues was evi In Cyprus, at the crossroads of Europe, Asia dent, celebrating with local female footballers and other foreign missions the FIFA Women’s World Cup 2023, hosted by Australia and New Zealand. In October, we hosted a discussion in Nicosia, with female leaders from around the world in different sectors of society, the army, peacekeeping, diplomacy and politics. As a country that respects human rights, we also actively support LGBTQI+ rights here, we participated in Pride events and presented Australian director Stephen Cummin’s shorts at the Queerwave festival. We also focused on the diaspora’s contributions, launching in Cyprus Anastasios Tamis’ book The Children of Aphrodite: Cypriots in Australia and we screened The Last Violin, a documentary on Harry Vatiliotis, an honoured Cypriot migrant to Australia. Furthermore, we encouraged bi-communal activities, supporting initiatives like the cross-island walks by Yalçın Adal and Stavros Tziortzis, underlining our commitment to the unity of all Cypriots.

What can you tell us about the number of Australian citizens residing in Cyprus and their main occupations?

Many Australians in Cyprus have dual citizenship but we estimate that there are just under 20,000 and we are constantly discovering new arrivals who choose to move to Cyprus for work or study. Like its business environment, Cyprus provides an attractive option for tertiary students with a Cypriot or EU passport (a less costly university degree with a good quality of lifestyle), although the range of degrees is more limited. The business focus of Australians in Cyprus seems to be on the financial services and real estate development sectors, but we also have very talented Australian citizens teaching in the university sector, driving research in archaeology, and even producing a programme for the Cyprus Broadcasting Corporation.

How do you perceive Cyprus’ lifestyle and culture? Are there specific aspects of local life that have left a lasting impression on you during your time here?

Having spent most of my time in the Indo-Pacific region, my time here has really highlighted the geostrategic importance of Cyprus as a safe haven during times of conflict, as a stable, democratic partner in Europe and as a gateway to the Middle East region. While our common democratic values and a belief in the international rule of law define us politically, my key personal observation is how welcoming Cypriots are and the many historical ties we have. With over 80,000 Cypriots choosing to call Australia home, it could be the similarities of great weather and love of BBQs and beaches that bring us together! I’m also struck by the significant effort that Australians have invested in Cyprus to support peace on this island. Over 1,600 Australians have served in Cyprus with the UN, with three paying the ultimate sacrifice with their lives, a long way from home.

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