The government’s proposed tax reform is under close scrutiny, with reactions intensifying just days before the consultation deadline on the draft laws. While concerns raised by business associations about potential risks to competitiveness have largely been addressed, criticism continues that the reform prioritises entrepreneurship over household relief.
The Cyprus Workers’ Confederation (SEK) is set to meet the finance minister in the coming days, maintaining that the reform is incomplete and requires a stronger social focus. SEK argues that the lack of meaningful social dialogue and the absence of measures to ease the burden of indirect taxation on households remain key obstacles to its consent.
SEK General Secretary Andreas Matsas recently reiterated that the proposed tax-free allowance, scales, and deductions fall short, and that provisions to relieve households from indirect taxes are missing altogether. “We hope”, he said, “the government will recognise the needs of workers and stop unilaterally rewarding entrepreneurship, as the proposed tax reform clearly does”.
According to Matsas, the draft laws give only secondary weight to policies that support workers, while measures benefiting businesses take priority. He also criticised the absence of a green dimension, calling the reform “incomplete”.
Citing examples such as tax incentives and the lifting of duties for businesses, Matsas stressed that when fiscal challenges arise, the burden typically falls on workers’ rights. He further underlined that public consultation cannot substitute for genuine social dialogue, and repeated that the reform is neither comprehensive nor aligned with the green transition.
AKEL: Progress with dialogue, not threats and blackmail
Recently, AKEL Political Secretariat member and head of the Economy Sector, Haris Polykarpou, emphasized that tax reform will not be achieved with threats and blackmail, but through dialogue.
At the end of July, in statements to "Politis" newspaper, MP and former president of the Democratic Rally, Averof Neofytou, and AKEL's head of the economy sector called for more support for the middle class.
Tax commissioner pushes talks with business groups
Tax Commissioner Sotiris Markides has been holding a series of consultations, where common ground has been found among business associations. Discussions have already taken place with KEVE, OEB, TechIsland, the Insurance Companies Association, and Invest Cyprus, with further technical meetings planned with SELK.
Additional consultations are also scheduled with the Cyprus Investment Funds Association (CIFA), the Banking Association, and the Pan-Cyprian Association of Professional Insurance Intermediaries.
Changes to provisions
Finance Minister Makis Keravnos, in his interview with "Phileleftheros" on Sunday, mentioned that the government is backing down regarding the controversial provision concerning the determination of business executives' salaries by the Tax Commissioner, with additional safeguards in the draft laws concerning business sealing.
The minister's statements confirmed information from "Politis" newspaper that was recorded in a report last Thursday. As "Politis" wrote, following concerns from associations and political parties about the provision regarding salary adjustment to free market prices by the Tax Commissioner, there are second thoughts about suspending its implementation and resubmitting it.
Following consultations, the provision allowing business premises to be sealed by court order for 48 hours after the non-issuance of three invoices is now under review, with authorities considering an alternative measure of issuing three written warnings before a court order is sought.
Under the revised approach, businesses would first receive a written warning, followed by a 15-day period to comply. If they fail to do so, a second warning would be issued, with another 15 days granted before the case proceeds to court for a sealing order.
At the same time, Finance Minister Makis Keravnos noted that the reform will raise the share of taxpayers exempt from income tax from 45% to 60%. He reiterated that the government will withdraw the reform if it is altered in ways that undermine its purpose, while maintaining the target date of January 1, 2026, for its implementation.
