The Christodoulides government’s flagship tax reform is facing growing resistance across the political and economic spectrum, raising doubts about whether it can be enacted by the target date of January 1, 2026.

What began as a broadly welcomed attempt to modernize a two-decade-old tax system has become a political minefield. Six bills presented for public consultation in July included additional provisions to tackle tax evasion, but these changes shifted the balance of the reform and triggered backlash from opposition parties, unions, business groups, and the Cyprus Stock Exchange.

Key proposals—such as raising the corporate tax rate from 12.5% to 15% and increasing the personal income tax threshold—remain largely uncontroversial. However, other measures, particularly the expanded powers of the Tax Commissioner and new anti-evasion clauses, have been branded by critics as “tax terror” for Cyprus’ business environment.

Professional associations warn the reforms could weaken the island’s appeal as an international business hub and drive away foreign investors.

• The Federation of Employers and Industrialists (OEB) cautiously welcomed the abolition of deemed dividend distribution but expressed concern over deadlines.

• The Cyprus Stock Exchange criticized the omission of measures to strengthen capital markets.

• Trade unions PEO, SEK, DEOK, and PASYDY accused the government of bypassing meaningful consultation.

The reform also faces an uphill battle in parliament. While the bills have yet to reach the floor, several parties have already declared their stance:

• DISY rejects the “legislative overpowers” of the Tax Commissioner, warning of damage to Cyprus’ business climate.

• AKEL denounces the reform as incomplete and skewed toward high-income groups, demanding progressive brackets, wealth taxation, and stronger relief for middle- and low-income households.

• DIKO calls for a simpler, fairer framework rooted in dialogue and warns against eroding legal certainty.

• Smaller parties—including DIPA, EDEK, ELAM, and the Greens—are still reviewing but have raised concerns over limited social focus and insufficient support for younger generations and the middle class.

Finance Minister Makis Keravnos has sought to ease tensions, stressing the government’s willingness to consider amendments. He has scheduled meetings with party leaders after the close of public consultation on September 10.

The government must also address a projected €200 million revenue gap. Experts at the University of Cyprus have suggested reinstating a property tax or introducing a corporate levy to offset the shortfall.

Time is short. Beyond the tax reform, parliament will soon be occupied with the 2026 state budget and looming parliamentary election campaigns. President Christodoulides insists on implementing the new system by January 1, 2026, but with both DISY and AKEL signaling opposition, the government risks missing its own deadline.