New advisory group needed
Cyprus losing its grip as a financial centre
New advisory group needed
BY ANDREAS NEOCLEOUS
I have written on a number of occasions to express my concerns at a decline in Cyprus's relative competitiveness as an international financial centre. A host of competing jurisdictions, including Ireland, Luxembourg, Malta, the Channel Islands and others have improved their attractiveness to potential users by removing unnecessary restrictions and modernising their legislation, and are promoting their services aggressively in the international marketplace. By contrast, Cyprus appears to be going backwards, losing many of its advantages.
If this deterioration in Cyprus's competitive position is not reversed, it will jeopardise a sector which directly accounts for a substantial proportion of national income and also contributes to the hospitality, retail and other sectors by bringing wealthy foreigners to Cyprus.
For more than 20 years, my firm together with other law firms and other professionals, has been at the forefront of efforts to promote Cyprus as an international financial and business centre. In November last year we received an award from the Cyprus Chamber of Commerce and Industry in recognition of our efforts. And a few weeks ago we held a major seminar for businessmen and professionals in Moscow in order to promote Cyprus.
However, the product we have to offer is looking more and more meagre, outdated and unattractive to our potential customers. Apart from the tonnage tax scheme for shipping, which is restricted to a single specialised sector, Cyprus has not developed a new product capable of attracting international business since the International Trusts Law was enacted. In the 20 years since then, as other countries have improved and streamlined their laws in this area, the International Trusts Law has come to look increasingly restrictive and outdated in comparison.
From the perspective of the practitioner, there seems to be inertia on the part of the responsible authorities: a project to modernise the International Trusts Law, initiated by my firm in concert with several other leading law firms, seems to meet delay and inaction at every turn. A draft law to regulate fiduciary service providers, published for consultation in 2006, has still not been enacted.
One of the areas in which Cyprus is especially lacking is the development of a funds industry. Given that for many years tax disadvantages held back the development of a funds industry in Cyprus, once they had been addressed I should have expected special efforts to be made to attract funds to Cyprus in order to catch up with other jurisdictions. Instead, there is continued inertia and delay: while most countries implemented the UCITS IV Directive by the deadline of 30 June 2011, Cyprus did not even publish its consultation paper until almost two months later and still has not transposed the Directive into national law.
At a time when legitimate tax mitigation measures are increasingly coming under attack from the governments of the larger western economic powers, and tax competition from other financial centres is increasing, I cannot over-emphasise the importance of maintaining Cyprus's competitiveness.
Within the professional and financial services sector there is a wealth of experience in the practical application of financial and tax laws and double tax agreements. Practitioners deal with these issues on a daily basis and know what potential clients require of a financial centre. I should therefore like to propose the establishment of a consultative committee of stakeholders drawn from the legal, accounting, banking and related professions to advise the appropriate authorities on the current legal and tax regime and on the practical implications of any changes which may be proposed. Given the importance of this issue, both for our country and for the professions concerned, I am sure that practitioners would welcome the opportunity to be involved in this process, and would make a very positive contribution. My firm, for one, would be happy to participate.
Andreas Neocleous is an advocate and chairman of the board of Andreas Neocleous & Co LLC, a member of Andreas Neocleous & Co International, a Verein (association) organized under the Swiss Civil Code. www.neocleous.com
