Cyprus is moving towards a new tax reform with the new year. The Ministry of Finance is expected to submit the new modern legislative framework to Parliament by the first half of 2025, following the completion of the tax reform by the Center for Economic Studies of the University of Cyprus and the competent technical services. Earlier, before the end of 2024, green taxes, including on fuels and water, are expected to be introduced.

Meanwhile, the Center for Economic Research of the University of Cyprus, which is conducting the study for the new modern tax reform, is expected to complete a large part of the work at the beginning of the new year.

Currently, the Center's team is conducting a study on the economic impacts and econometric estimates of green taxation on various income classes and population groups with different characteristics, and is costing the revenues and expenses that will result from taking compensatory measures to mitigate the impacts.

At the same time, existing tax systems are being studied, and changes to the tax system are being assessed. This work is expected to be completed in September. Then, a public consultation is expected to take place to make the necessary political decisions.

Among the actions underway are:

• Analysis and recording of the existing tax framework, e.g., weaknesses, deficiencies, and administrative burden, in collaboration with the Tax Department. The analysis is considered useful for the proposals to be submitted for simplifying the tax system.

• Recording the experiences and practices followed by European Union countries and reviewing relevant literature (with a primary focus on international organizations such as the EU, OECD, World Bank, ECB) and other countries.

• Preparation of a report on best practices.

• Identification and recording of relevant tax legislation.

• Recording of European Directives and international obligations and changes to the tax framework in relation to the Recovery and Resilience Plan.

• Empirical studies from other countries, mainly in the EU, such as econometric methods and tax models of other European states, elasticity estimates, and tax multipliers for the Cypriot economy, and comparing findings with some EU countries.

This analysis will lead to suggestions following public consultation.

Before finalizing the tax framework, the suggestions of the private sector, professional bodies, and councils will be considered. Subsequently, the Ministry of Finance will make its decisions on the tax transformation issues, such as tax rates. The quantitative and qualitative assessment of the Center for Economic Studies will be taken into account.

Legislative drafts will then be prepared based on the analyses, estimates, and opinions, and final consultation will be conducted before submission to the Council of Ministers.