Cyprus Tax Changes Will Reward Hard Work, Says Klerides

by Lorys Charalambous, Tax-News.com, Cyprus

21 November 2001

In the run-up to talks in the House of Representatives regarding the government's radical tax reform plans, Cypriot Finance Minister Takis Klerides has promised that changes in the regime will reward hard work and encourage investment.

'The tax reform opens new horizons for our economy,' he told a press conference. 'It is an incentive for individuals to take on more work if they wish and will serve as an incentive for local and international companies to expand.'

The Minister is due to appear before the House Finance Committee later this month, and is keen to achieve the greatest consensus possible on the issue of tax reform, as the island's accession to the European Union is dependent on changes being made to the preferential rates for offshore companies located in Cyprus, VAT being raised to 15%, and excise taxes being increased on petrol and diesel.

Although opposition parties have been critical of the government's proposed reforms, Mr Klerides has said that he is confident that the package will be passed.'There is a general agreement among the parties about the basic objectives,' he told reporters, adding: 'We are ready to discuss proposals, provided they are within the general framework.'

Mr Klerides went on to reassure lower income groups that despite the lack of detail offered by the government on social benefits to compensate for the effects of higher VAT rates, they would benefit overall from the new measures, and revealed that the raising of the tax free income bracket to £9,000 would leave Inland Revenue officials with more time and resources to pursue tax evaders. The fight against tax evasion in Cyprus will be boosted by the imposition of a 10% defence tax on interest at source, according to Mr Klerides.

The Cypriot government is also proposing the imposition of a flat 10% corporate tax rate for both international and local companies, and the Finance Minister stated that in his opinion, this would cement the jurisdiction's position as an international business centre.

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