By the end of November, the University of Cyprus's Economic Research Centre will complete the impact assessment report on the new tax reform. According to information provided to Brief, the report is being prepared using econometric methods and models—impact assessment techniques.

A well-known economist explains that "impact assessment is an official process used to measure the effectiveness of proposed actions and interventions. It can relate to significant policy decisions as well as specific programmatic projects, examining the impacts a particular action or intervention will have on specific groups of people, businesses, and/or the environment."

In the case of the tax reform, the purpose of the impact assessment report is to evaluate the effects of the reform measures:

1. To understand the potential consequences of a proposed action, change, or intervention, so the state can respond to any positive or negative outcomes.

2. To identify the necessary procedures and methods for future policy, planning, and project cycles.

3. To make environmentally, socially, and economically sustainable decisions for organizational and economic development.

The economists working on the new tax reform, relying on econometrics and econometric models, will forecast future trends.

It should be noted that the use of econometric models is increasingly being adopted by those responsible for shaping economic policy to help guide fiscal management strategies. Governments and central banks especially make use of econometric data.

In the study by the Economic Research Centre of the University of Cyprus regarding tax reform, scientists focus on:

• Promoting investment and tax policies to reduce business risk and encourage financing or investment in research. This includes simplifying the tax system and reducing tax costs, which fosters innovation, investment, and competitiveness.

• Shifting part of the tax burden from labor to other forms of taxation, such as consumption, green taxation, and property, to encourage employment.

• Implementing green taxation that contributes to environmental goals by taxing polluting activities. Economists from the Ministry of Finance believe that green taxation has a progressive nature and impacts low-income groups, hence the need for compensatory measures.

• Tackling the shadow economy and reducing tax evasion.

The Ministry of Finance has informed Parliament that the study on the reform will cost around one million euros.

The agreement between the Ministry of Finance and the University of Cyprus for conducting the study will last two years, with the possibility of a six-month extension.