A surprising increase in tax revenue from self-employed individuals has caught the attention of even the Fiscal Council. The spike, however, is not attributed to a dramatic rise in economic activity among freelancers but rather to measures implemented by the Ministry of Finance and the Tax Department.

As Finance Minister Makis Keravnos explained to Brief, the surge in revenue is due to, among other things, increased inspections aimed at curbing tax evasion and avoidance.

According to the Fiscal Council’s Interim Report for the first five months of 2024, tax revenue from self-employed individuals saw a 421% increase compared to the same period in 2023. Fiscal Council President Michalis Persianis told Brief that the €70 million increase in self-employed income tax revenue is remarkable, adding that the efforts of the Ministry of Finance and the Tax Department appear to be yielding results.

The Fiscal Council's report also notes that this significant increase either reflects a dramatic rise in economic activity in this sector or a substantial improvement in the government's tax collection capabilities. Finance Minister Keravnos addressed this question, commenting on the data presented by the Fiscal Council and outlining the measures taken by the Tax Department to strengthen tax collection efforts.

Keravnos highlighted that, in collaboration with the Tax Commissioner, significant reforms have been introduced. These include hiring additional staff and implementing a modernized IT system, which continues to be enhanced. According to the Minister, these efforts have directly contributed to the remarkable results seen in tax collection.

Additionally, beyond these reforms, the Minister emphasized that inspections have intensified across the board, with the goal of cracking down on both tax evasion and avoidance.

Despite the progress made recently—whether through the wider use of credit cards or the new measures implemented by the Tax Department—the black market will continue to exist, as it does in all countries.

A study by the University of Cyprus’s Center for Economic Research (2021) found that Cyprus’s black market amounted to approximately €4 billion, or about 20% of GDP.

As one of the study's co-authors, George Syrichas, previously explained to Brief, while the black market exists everywhere, what differentiates it is its share of GDP. Syrichas further elaborated on why it's difficult to eliminate entirely, explaining that in many cases, transactions occur without documentation—for instance, when someone comes to your home to provide a service, doesn’t issue a receipt, and you pay in cash. Both parties benefit: the service provider avoids taxes, and the customer pays a lower price. This creates a double incentive for the black market to persist.