Finance Minister Harris Georgiades has quickly dropped his proposal to increase the corporate tax rate from 12.5% to 15% after Cyprus business leaders strongly opposed the idea.
The Finance Ministry proposal was met with unanimous disdain by the Chamber of Commerce (ΚΕVΕ), Employers and Industrialists Federation (OEB), Cyprus Investment Promotion Agency (CIPA), the Cyprus Investment Funds Association (CIFA), the Bar Association and the Institute of Certified Public Accountants (SELK).
Following a joint statement by the six, the Minister conceded that the increase “will simply not go ahead if there is no consensus from the private sector”.
Leaders of the six organizations convened on Wednesday at KEBE headquarters, in Nicosia, to discuss the proposal. After the meeting they called on the Minister of Finance to revoke his proposal, warning of its negative impact on the country’s credibility.
KEVE’s Chairman Christodoulos Angastiniotis , told reporters afterwards that tax reform could only be discussed after a “serious” study had been conducted.
He stressed that tax reform should aim at reducing taxes paid by all the companies that are based in Cyprus and at the same time increase the country’s prospects for growth.
Such moves, he added, should be examined seriously before they are tabled in order for Cyprus to avoid being considered a country with an unstable tax environment.
Angastiniotis said that there was no pressure from Cyprus’ European partners for such an increase, noting that countries like Ireland and Bulgaria have a lower corporate tax rate while others seek a reduction.
“We believe that if the Cypriot economy has any vulnerabilities, which of course are not linked to the level of tax but to compliance, we should examine those rather than make moves that will damage prospects for the Cypriot economy.”
OEB chairman George Petrou said the proposal caused concern especially abroad and that negative messages had already been received.
“Our credibility as a state has been damaged once again.”
SELK’s chairman Demetris Vakis argued that Cyprus’ tax policy should seek to reduce the overall cost for companies in the long term and contribute to the development of entrepreneurship both by local and foreign companies.