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Cyprus Tax Reforms Put On Hold

Mandy Robinson, Tax-news.com, London

18 December 2000


Tax reforms originally planned to be enacted this month have been put on hold and are unlikely to go ahead until at least this time next year. This is the conclusion of a Cyprus government plenary session held on Thursday last week. Although proposals for the reforms will still be submitted to Parliament before the end of this month, opposition political parties DISY and DIKO have stated their intention to refuse to support the amendments.

The tax reforms are an attempt to harmonize Cyprus's taxation system with the EU by raising the VAT rate and imposing other special taxes and duties. The government also proposes to do away with the defence tax and to increase the level of tax-exempted income. In order to fulfil the island's commitments under the Customs Union Agreement with the EU, all import duties would be brought into line with single market levels. The bill includes the reduction of duties on imported fruit and vegetables from EU, with a 15 per cent special duty imposed on imports of certain frozen fish, including gilthead (tsipoura).

Amid suggestions at the plenary session that the tax reforms may be implemented before the next elections in May 2000, DISY MP Panagiotis Demetriou and DIKO Chairman Tassos Papadopoulos said this was infeasible for such a major issue: 'No matter what, it is impossible to complete such a discussion by May,' said Mr Papadopoulos. The government itself would not pledge to complete the discussions on tax issues before its dissolution prior to the May elections. The EDI had also sought for the implementation of the tax reforms next spring and urged for an extension to the defence tax by three months instead of one year. But DISY and DIKO rejected this proposal and, since nobody could agree, it was unanimously decided that the defence tax and other taxes remain as they are until the end of 2001

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