It’s a weighty statement to speak of a “tax reform.” The bills approved by Cabinet are, in essence, a rational adjustment of tax rates, based on the realities that have now taken shape. And yes, they represent a clear improvement for Cypriot businesses and households compared to what currently applies. They also help the country move off tax evasion blacklists, while avoiding the granting of excessive powers to the Tax Commissioner. If MPs approach the government’s proposed bills with a sense of fairness, there should be no obstacle to passing the changes - and doing so swiftly.
Economist and Politis columnist Tasos Iasimidis put it very aptly during a discussion we had last week on the radio show Show Me the Money: “Tax rates do not make social policy.” If we truly wanted a social policy, I would add, then the Ministry of Labour and Social Insurance and the Deputy Ministry of Social Welfare should be leading the way. If we were talking about any change relating to the country’s business direction, then the Minister of Commerce should play a central role - something that does not seem to be happening.
Even the Minister of the Interior ought to have a say if the reform were to address the housing problem. After all, how can this issue be resolved without taxing large idle properties? For that reason, if the tax reform is passed, it will mark the first of many steps that must follow.
In any case, when Finance Minister Makis Keravnos launched this initiative, he spoke of the need for a gradual tax reform. In the months ahead, green taxes and other levies related to energy will also be incorporated. Will businesses and households be better off than they are today? Time will tell. What is certain, however, is that without a readjustment of tax rates, without raising the income tax threshold for households and significantly reducing the tax on dividends, everyone would be worse off. For that reason, if there are to be battles in Parliament, they should not be over the rate adjustments themselves. It would be wiser to focus on what is yet to come.
And the truth is that, beyond taxes - green or otherwise, which no one particularly looks forward to - businesses and households are hoping for a simpler, fully digital system. A true reform could differentiate between small and large enterprises and reduce the administrative burden on smaller ones. Positive elements also include the proposals by DISY MP Fotini Tsiridou, who aims to speed up the resolution of tax disputes, as she explained during the radio show. These disputes, which often drag on unjustifiably, do no good for the country, especially when it comes to foreign investors who are unaccustomed to such third-world delays. If disputes with the state - typically straightforward cases - cannot be resolved within a reasonable timeframe and the amounts involved reach €500 million, then what does that say about complex private disputes?
Even worse, if those €500 million are indeed refunded to individuals, the country’s supposed budget surplus will effectively vanish, revealing that it was, perhaps, misleading to begin with. For all these reasons, tax reform does not end here - it begins now.
It is a bright field of opportunity for all those who genuinely wish to change the country, and they will be able to do so once they have won the elections, not from the comfort of the opposition benches.