Filenews 22 March 2025 - by Angelos Angelodimou
As "F" is informed, at yesterday's session of the Economic Advisory Committee, a suggestion was made to the Government to change its proposal for a 30% tax burden on a large part of the middle class of workers.
Specifically, it was proposed to create a salary scale of €30,001 – €50,000, with 25% taxation, instead of a scale of €40,001 – €80,000, with 30% taxation, proposed by the Government through the JITs of the University of Cyprus.
What was discussed yesterday
A number of key issues that are included in the tax reform promoted by the Government after yesterday's discussion on the issue, within the framework of the Economic Advisory Committee (SOE), seem to be included in a series. Great importance was given to the imposition of green taxation, with Makis Keravnos stressing that efforts will be made for an extension. However, if this is not achieved, the trade unions stressed that we should immediately discuss compensatory measures for taxpayers.
The 5 points of discussion
More specifically, as reported by "F", some issues dominated yesterday's discussion and as it turns out, they seem to be in a sequence, either to be resolved, or to make an effort to resolve, or even to provide clarifications that they will be settled in another way.
Specifically:
(1) As Fileleftheros is informed, there was a special reference to a change in a specific tax scale. Specifically, it was mentioned that the scale of €40,001 – €80,000, with 30% taxation, covers a very wide range of employees and the possibility of its differentiation should perhaps be considered. For example, to change the previous scale, which is from €30,001 – €40,000 and to become up to €50,000 and to keep taxation at 25%.
(2) Issue of the imposition of green taxes. Makis Keravnos clarified that, in the context of securing funding from the Recovery Fund, the previous government undertook a number of commitments, including the imposition of green taxation. An effort will be made, where possible, to differentiate the time milestone for the imposition of these taxes.
(2) The fact that a large percentage of workers over 40% are below taxable income and therefore have no benefit from tax reform. The Minister of Finance clarified: The tax reform concerns the taxpayers. However, government policy does not stop at tax reform. Therefore, this section of citizens will be considered in the context of social or labour policy. Here the issue of strengthening the benefit policy for these individuals was raised, as they did not benefit from the reform.
(3) Issue of tax evasion and undeclared work. There was an admission from both the government and the trade union side, which raised the issue, that there is great scope for a more effective approach to this issue, and concrete measures will be taken in this direction. As it was said, the percentage of the informal economy reaches 25%, however, the Ministry of Finance seems to consider that this is actually smaller. What was asked is for Statistics to clarify the specific percentage.
(4) Other taxation issues raised by the social partners, such as VAT, taxation of Health Funds, as well as contributions to the Social Cohesion Fund and the Redundancy Fund, will be studied and accordingly there will be an answer as to whether or not they can be adopted. This, except for VAT, which the Government does not seem to intend to discuss now.
Green taxation
As it turns out, the issue of the imposition of green taxation was discussed extensively at yesterday's meeting. Asked by the Minister of Finance whether green taxes will be implemented next May, Mr. Keravnos said that for green taxes on fuel, water and waste, there is a commitment because they have been included in the Resilience and Development Plan and specific milestones have been set. "The milestones were in November 2022 and we through many efforts managed to bring them to May 2025," he said.
He added that "we were able to remove the carbon tax from businesses so as not to create further inflationary pressures and we also tried very hard to convince them to apply for only two years. Efforts continue and I hope that there will be the best possible result for the tax burden for society as well." Asked to clarify whether it will be examined whether they will be imposed in May or whether their application will be extended, Mr. Keravnos said that "the time milestone is in May, but this does not mean that our efforts to differentiate ourselves will stop."
