The government has secured the approval of the tax reform by a majority of the House Plenary, as DISY, DIKO, DIPA and EDEK have formally committed to supporting it during a meeting with Finance Minister Makis Keravnos held the day before yesterday at the Ministry of Finance.

According to information obtained by Brief, three key components of the tax reform—namely the increase of the tax-free income threshold to €22,000, the revision of the income tax brackets, and the further expansion of family-income deductions—fully satisfied the centre-right parties, reportedly as part of a broader “political exchange”.

The “political exchange”, given that the Christodoulides government has adopted the proposals submitted by the four parliamentary parties, is the commitment to vote in favour of all tax-reform-related bills before the Plenary.

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It is clear from yesterday’s positions expressed by MPs of the Parliamentary Committee on Finance, during the article-by-article discussion of the bills, that these four centre-right parties will effectively “steer” the Plenary, as together they form a voting majority.

Although the government considers the approval of the tax reform essentially secured, Finance Minister Makis Keravnos also requested—and obtained—two additional commitments from the four parties:

a) To vote in favour of all measures and tools aimed at combating tax evasion.
b) To reject any new amendment submitted before the Plenary that would further reduce state tax revenues.

Technocrats at the Ministry of Finance estimate that, following the informal agreement between the ministry and the four parties (DISY, DIKO, DIPA and EDEK), the resulting reduction in state tax revenues will amount to €110 million.

It remains unclear whether the core principle of the tax reform—that it should be revenue-neutral—has been maintained. Ministry technocrats are reportedly expressing reservations regarding whether such neutrality can be achieved under the updated framework.

Asked by Brief about whether the state’s public finances can sustain the concessions made to centre-right parties, the Finance Minister stated unequivocally that all decisions were assessed based on the fiscal capacity of the Republic.

Today, the Parliamentary Committee on Finance will continue its article-by-article discussion of the bills. Among the issues to be addressed is the provision for the criminal liability of company directors.

According to information obtained by Brief, the Ministry of Finance sought and received legal advice from the Attorney General’s Office on this matter, resulting in certain modifications. However, the core principle advanced by the Tax Department remains unchanged.

The principle of corporate responsibility means that company directors will be held accountable for obligations relating to VAT and employee tax contributions. Directors who resigned in due time from companies that failed to fulfil their tax obligations, and whose resignation was duly recorded by the Tax Department, will be exempt from liability.

A tense atmosphere unfolded during yesterday’s session of the Parliamentary Committee on Finance, following the ministry’s meeting with representatives of DISY, DIKO and DIPA the previous day.

The meeting, which excluded the remaining parliamentary parties, produced agreement on key aspects of the tax reform, including the increase of the tax-free income threshold, the revision of income tax brackets and the further expansion of family-income deductions.

AKEL argued that certain parties were “offering cover at the expense of the many” and the Greens claimed that the revised bills did not align with the agreement between DISY, DIKO and DIPA.

Onoufrios Koullas, DISY MP, defended his party, stressing that it would not have to justify “with whom it holds meetings”, adding that DISY attended the ministry meeting following an invitation from DIKO.

The Chair of the Finance Committee and DIKO MP, Christiana Erotokritou, stated that the meeting was both appropriate and necessary. She noted that parties have an obligation to maintain communication with the government “to avoid surprises”, rejecting claims of “back-room dealings” and underlining that everything occurred transparently.

She expressed strong disagreement with AKEL’s legislative proposals to reinstate taxes imposed during the memorandum period.