Filenews 19 April 2025 - by Eleftheria Paizanou
Although the necessary interconnection of the systems of the Tax Department with the cash registers of businesses has not yet taken place, the mandatory acceptance of credit cards as a means of payment by almost all entities operating in the market, as well as the other measures taken by the competent Department, contributed to the large increase in tax revenues.
However, it is worth emphasizing that the increase in tax revenues is also linked to the wave of inflation that has hit Cyprus - and other European economies - in the last three years, which has led to increased VAT revenues. This is because businesses collected more VAT from their customers for the -more expensive- products and services and this money ends up in the state.
Compared to 2020, when it was not yet mandatory to accept a card for payments, by the end of 2024, tax collections increased by 72%, i.e. by €3.1 billion, without implying that all the increase is due to the increased use of bank cards. But their contribution to the increase in tax revenues is considered significant by the Tax Department, although it cannot be accurately estimated at this stage.
Specifically, last year the state coffers ended up in tax receipts of €7.4 billion, compared to €4.3 billion in 2020, before the inflation storm and before the mandatory acceptance of a card by businesses.
According to data from the Tax Department, in recent years collections in relation to taxes have recorded an upward trend. In detail, in 2024 collections were increased by 10% compared to 2023, during which taxes of €6.7 billion were collected. In 2022, the state had tax revenues of €6 billion, in 2021 the receipts were €5 billion and in 2020 €4.3 billion.
A good course in 2025
An upward trend in revenues was also recorded in the first two months of 2025, where a surplus of €654.2 million was accumulated, corresponding to 1.9% of GDP.
Total revenues, during the period January-February 2025, increased by €303.3 million (12.5%) and amounted to €2.7 billion compared to €2.4 billion in the corresponding period of 2024. Specifically, total taxes on production and imports increased by €92.5 million (+12.4%) and amounted to €835.7 million compared to €743.2 million in 2024, of which net VAT revenues (after deduction of refunds) increased by €35.8 million (+6.8%) and amounted to €559 million compared to €523.2 million in 2024.
Income and wealth tax revenues increased by €95.1 million (+13.2%) and amounted to €816.8 million, compared to €721.7 million in 2024.
More than three times as much revenue in Greece
According to a study conducted by the Independent Authority of Public Revenue, last year businesses and professionals received more than three times as much revenue with cards instead of cash. In fact, in some sectors the increase reached 2,500%.
According to the study, electronic transactions carried out through payment cards recorded an increase of €8.3 billion between 2023 and 2024, reaching €47.7 billion last year, from €39.5 billion. in 2023.
Greek publications have reported that the full and mandatory interconnection of cash registers with credit card terminals, which was implemented in the context of the digital upgrade of the tax administration (such an interconnection does not yet operate in Cyprus), functioned as a tool to reveal the true extent of transactions made in all market sectors.
In fact, the publications spoke of a "treasure" of transactions, which had not been detected for so many years by the state authorities, due to the absence of this interconnection.
In Cyprus, studies are being conducted...
In Cyprus, the interconnection of the systems of the Tax Department with the cash registers of businesses is delayed, even though studies are being carried out on feasibility.
For this purpose, funds have been included in the state budget in recent years to cover the costs of the interconnection. There are estimates that the project will be implemented after the modernization of the infrastructure and the legal framework in relation to invoices and receipts.
With the automatic interconnection, in real time, of the Market with the Tax Department, the Department will be able to receive immediate and reliable information on the purchase and sale in trade. At the same time, with this system, the Tax Department will be able to react immediately in cases of tax evasion.
A competent source told "F" that with the interconnection of the market with the systems of the Tax Department, no one will be able to escape from the tweezers of the Tax, as even for even one euro of a transaction that will be made, the relevant tax will be deducted.
As we have been told, no one will be able to hide revenues, which will help to tackle widespread tax evasion. The implementation of the interconnection of electronic payment machines with the Tax Department has already been carried out by other tax authorities, with great success for the state coffers. The competent authorities receive real-time information on market transactions, for the purpose of obtaining immediate information on purchases and sales in the economy and for a rapid reaction to cases of tax evasion.
What does the law provide? The legislation regarding the mandatory acceptance of credit cards has been in force by law since September 2021. Businesses that fail to comply and refuse to accept credit card payments are subject to a fine of €4,000.
According to the law, businesses have the obligation to inform consumers that they accept credit cards as a means of payment and this should be clearly written at the entrance of the store and at all checkouts.
An upward trend is also recorded in the rate of payment of tax debts electronically through JCC, banking institutions (VAT) and internet banking (VAT and Regulation of Overdue Tax Debts), in terms of the Department's total collections.
In 2023, the percentage of electronic payments was 95.4%, in 2022 electronic payments ranged at 91.3%, in 2021 they were 81.99% (the year the law on the mandatory acceptance of credit cards came into force) and in 2020 they were 71.7%. It is estimated that last year electronic payments to the Tax Department exceeded 96%.
Other tax collection measures
Apart from credit cards, the other measures that contributed to the increase in tax revenues and tax compliance were the ban on cash transactions for purchases over €10,000, the non-acceptance of cash by banks without justification, as well as the inclusion of up-to-date tax data in bank details.
The contribution of compliance campaigns and on-the-spot audits of the Tax Department was also important. The use of new technologies, set-offs and clearances also contributed to this effort.
It should be noted that last month the competent department began the clearance of 2023 tax returns for individuals. In addition, Tax For All (TFA) improved the process, allowing the refund of more than €1 billion to businesses.
The Tax Department's plans include the further strengthening of the tax collection of the state. Specifically, the modernization of the framework for the issuance of legal invoices and receipts is promoted by directly connecting businesses with the Tax Department (Online Fiscalization).
The Ministry of Finance is conducting a study in order to find the best possible technology and solution to enhance tax compliance through the mechanisms for issuing legal invoices and receipts.
