Cyprus Tax Reform Bills Near Completion as Keravnos Confirms Possible Final Adjustments

Cyprus’ long-anticipated tax reform is entering its final stages, with the relevant legal bills expected to be completed within the next few days, according to Finance Minister Makis Keravnos.

The minister confirmed that the drafts are currently under review by the legal service and that minor adjustments may still occur before the final submission to parliament.

Keravnos, accompanied by the Tax Commissioner, met on Wednesday afternoon with the general secretariat of the trade union Sek at its headquarters, where the union presented additional proposals related to the reform. Following the meeting, the minister described the session as “a very productive discussion focused exclusively on the tax reform.”

He added, “We heard many interesting ideas that sparked further thought, and the exchange of views on such serious issues helps everyone improve the final outcome.”

Keravnos also noted that “many clarifications were given in all directions, both from the ministry and Sek’s leadership,” explaining that this exchange “will help everyone proceed and finalise the process in time to submit the tax reform package to parliament.”

Sek General Secretary Andreas Matsas expressed appreciation for the dialogue, thanking both the Finance Minister and the Tax Commissioner for what he described as “a substantive, fruitful and productive meeting.” He said the union had the opportunity to submit additional proposals aimed at ensuring the reform is “as balanced, comprehensive and socially fair as possible.”

Matsas highlighted that the meeting provided a platform to clarify several questions and emphasized “the importance of prioritising the fight against tax evasion.” He added, “This will allow us, through this component, to create more positive prospects for an even more comprehensive tax reform.”

According to Matsas, one of Sek’s main objectives is to support vulnerable groups, noting that “this approach aims to support vulnerable groups of the population, including nearly one in two workers who will not directly benefit from the reform, through the creation of compensatory benefits to make the reform as complete as possible.”

He also reiterated Sek’s commitment to assist the government, saying the union “remains at the minister’s disposal to assist further in completing the tax reform smoothly while also supporting the most vulnerable groups.”

Matsas further explained that the talks helped link the tax reform with the broader debate on pension reform, “placing special emphasis on provident funds to ensure that there will be no negative impact on the institution.”

He confirmed that the union also secured “the regulation of ex gratia compensations in a way that benefits entitled employees,” describing the outcome as “a comprehensive discussion and arrangement that will have positive outcomes for all those affected.”

When asked by journalists to share examples of Sek’s supplementary proposals, Matsas declined to go into specifics, saying, “It is more important for these suggestions to emerge through the final product that the Finance Ministry will present, which would be evaluated in due course.”

Keravnos, responding to questions about whether any changes had been made to the bills under legal review, acknowledged that “it was natural for some modifications to occur while consultations continue.” He clarified, however, that “the main framework and philosophy of the tax reform remain the same,” though “certain individual issues may be adjusted through these discussions.”

Regarding the current status of the reform, the minister confirmed that “the bills are at the legal service and are expected to be completed within the next few days.” When pressed on whether further amendments were still possible, Keravnos replied, “Amendments can always be made until the last moment.” He compared the process to the submission of the state budget, noting, “Changes are made every year after submission.”

Asked whether the government might offer incentives for businesses to implement the Cost of Living Allowance (CoLA) system, Keravnos said the matter “was not on the agenda that day.” When a journalist suggested that such incentives could fall within the scope of the tax reform, he responded that “the reform already includes reliefs and rationalisations for corporate taxation, leaving it to businesses to decide how to utilise these benefits.”

Matsas supported that line of reasoning, saying, “The question was reasonable,” but added that “it would be more productive if issues related to the pending CoLA discussions were concluded positively in upcoming meetings with the Finance and Labour Ministers.”

When asked whether the framework set by the government remains unchanged or has undergone modifications, Keravnos said, “Every discussion leads to a conclusion, which is the natural result of dialogue.”

For his part, Matsas said he was satisfied with the Finance Minister’s involvement in the ongoing CoLA talks, noting that it was important “that steps are being taken in the right direction, with the aim of successfully completing the matter.”

He concluded by reaffirming Sek’s commitment to constructive dialogue, saying, “The message we want to send once again is that the institutional framework of social dialogue must function in support of smooth labour relations.” Matsas ended on an optimistic note: “We hope things will develop in a way that allows us to keep smiling.” 

By fLEXI tEAM