EU Warns Consensus Needed For Tax Reforms In Cyprus

by Lorys Charalambous, Tax-News.com, Cyprus

05 February 2002

The European Union has praised the pre-accession economic programme (PEP) adopted by Cyprus, saying that it shows 'a coherent economic strategy'. However, it has warned that for the bold new tax reforms envisioned by the Cypriot government to be successful, there must be significant social consensus.

This verdict was delivered in an evaluation prepared by the European Commission's Directorate General for the Economic and Financial Affairs Council last week.

The PEP serves the dual purpose of outlining the medium-term policy framework necessary for EU accession and offering an opportunity to develop the capacity to participate in EMU. Cyprus's programme, which includes the liberalisation of previously protected sectors of the economy, and plans for fiscal consolidation, is based upon 'cautious and acceptable assumptions about both the external environment and other exogenous factors', according to EU experts.

The evaluation report described the government's planned changes to the taxation regime as the 'most significant and radical tax reform in the last 20 years'. However, in light of a survey conducted in December which revealed that approximately one third of the island's population is under-informed as to the nature if the reforms, the European body warned that social consensus based on more effective dissemination of information is required.

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