The planned tax reform will cover all income groups, based on the amendments agreed during yesterday’s two-hour meeting chaired by Makis Keravnos with representatives of parliamentary parties DISY, DIKO and DIPA.

This is because the revised tax brackets, as proposed and expected to be approved by the majority of parties, apply across all income levels, with a particular focus on easing the burden for the most vulnerable groups.

Special emphasis is placed on families with many children, while the government is also expected to soon expand social benefits for individuals whose annual income does not fall within the tax-free threshold.

Brief reveals the new annual income tax brackets agreed between the Finance Ministry and the three parties, which also appear to be acceptable to EDEK, despite the party not being present at the meeting.

It should be noted that the tax-free income threshold will rise to €22,000, as Brief reported yesterday.

The relevant amendment will be submitted today to the Parliamentary Committee on Finance and provides for the following tax brackets:

• From €22,000 to €32,000, the tax rate will be 20%.

• From €32,000 to €42,000, the tax rate will be 25%.

• From €42,000 to €72,000, the tax rate will be 30%.

• Above €72,000 of taxable income, the tax rate will be 35%.

The current tax brackets under the existing system are:

• From €19,500 to €28,000, the tax rate is 20%.

• From €28,000 to €36,300, the tax rate is 25%.

• From €36,300 to €60,000, the tax rate is 30%.

• Above €60,000 of taxable income, the tax rate is 35%.

A separate amendment on family tax deductions has been prepared. Under this proposal, tax deductions will begin at €1,000 for the first child.

For the second child, the deduction will be €1,250, and for the third child and beyond, €1,500 per child.

To qualify for deductions, a family with two children must not exceed an annual income of €100,000.

For families with three or four children, family income must not exceed €150,000.

For families with more than four children, family income must not exceed €200,000.

Additionally, the deduction for mortgage or rent interest will rise from €1,500, as initially proposed in the bill, to €2,000.

The Finance Minister also stated yesterday that stamp duty will be abolished.

During the meeting between the three parliamentary parties and the Finance Minister, it was emphasised that the proposed additional tax reliefs and deductions will be withdrawn if Parliament rejects the accompanying measures aimed at combating tax evasion.

When asked yesterday whether the major concerns raised by professional bodies representing lawyers and accountants—regarding foreign investment and whether certain provisions might hinder investor attraction—were discussed, Mr Keravnos said:

“Let me remind you that in 2002, during that period’s tax reform, the decision to increase corporate tax from 4.25% to 10% caused considerable concern that foreign companies would leave Cyprus.” “Not only did foreign companies not disappear,” the Minister said, “but the number of foreign investors actually increased. The same happened during the Troika period, when corporate tax rose to 12%, provoking similar reactions. Since then, foreign investment in Cyprus has remained above the levels of that earlier period.”