The new tax reform announced by Finance Minister Makis Keravnos is set to reshape the financial landscape, with a focus on creating lasting benefits for future generations. The six bills that comprise this extensive reform were presented to MPs at the House finance committee on Friday, marking a significant step in Cyprus’ fiscal evolution.
Keravnos described the reform as “exceptionally important,” aiming to tackle inequalities and correct long-standing fiscal distortions. He emphasised that the new framework is designed to be fiscally viable while aligning with European Union obligations.
Addressing Inequality and Enhancing Competitiveness
One of the primary goals of this reform is the fair distribution of the tax burden. The measures are intended to boost economic competitiveness and provide support to households, especially families with children. The minister acknowledged that while the timing might be challenging—given the approaching scrutiny of state and ministry budgets—this reform has been in the pipeline since August.
“The cabinet approved the proposals on October 29, paving the way for their submission now,” Keravnos explained. He expressed hope that the reforms would be assessed objectively, without being clouded by political agendas.
Key Features of the Tax Reform
The reform introduces several noteworthy changes aimed at easing financial pressures on families and enhancing the business environment. For individuals, the non-taxable income threshold is set to rise from €19,500 to €20,500, while the non-taxable amount for compensation in voluntary resignation cases will significantly increase from €20,000 to €200,000.
- The lump sum for extending non-domicile status is reduced from €1.25 million to €250,000 over five years.
- Tax exemptions will be available for spouses, partners, multi-member families, and single-parent families.
- Grants for vulnerable families will increase, alongside reduced interest rates for home purchases, energy upgrades, and electric vehicles.
- Subsidised home insurance against natural disasters and personal insurance for disabilities are included in the reform package.
Support for Businesses and Economic Growth
Keravnos highlighted that the reforms are expected to strengthen business competitiveness while curbing tax evasion. Improvements in company tax rules and the abolition of several contributions aim to stimulate business activity, innovation, and capital investment.
Initial estimates projected a surplus of €112 million from the reforms, but later revisions adjusted this figure down to €18 million. Despite these changes, the minister reassured the public that the reform prioritises support for low-income groups.
Next Steps for Parliament
As the House finance committee begins its examination of the tax bills, committee chairwoman Christiana Erotokritou has indicated that they will not adhere to tight deadlines, allowing for thorough consideration of the proposed changes. Keravnos expressed his ministry’s readiness to provide any necessary clarifications to assist MPs in their evaluations.
This ambitious tax reform is poised to make a significant impact on the socio-economic landscape of Cyprus, with the potential to benefit generations to come.
