Trade unions and opposition parties are demanding Cyprus raise the tax-free income threshold beyond the €21,500 proposed in the government’s tax reform and revise tax bands, arguing the current plan unfairly benefits higher earners.
The unions are preparing a joint proposal to put before political parties and the government.
A PASYDY representative told the House Finance Committee the proposed rates are unbalanced for workers, noting that civil servants with household income of €80,000 will not benefit. With the tax-free threshold at €21,500, only state employees up to grade A7 will gain, leaving out police officers, nurses and teachers, he said.
PEO said the tax-free threshold should be raised and tax bands revised.
DISY MP Onoufrios Koullas said there should be a political discussion with the finance minister on tax bands.
AKEL MP Andreas Kafkalias said the government’s proposals are unfair, noting that someone earning €90,000 gains €1,500 whilst those earning under €25,000 will see no benefit. AKEL will put forward proposals to revise the tax-free threshold and tax bands, he said.
Finance Committee chairwoman and DIKO MP Christiana Erotokritou said the changes will be discussed with the minister, stressing that proposals are needed to correct some distortions.
ELAM MP Sotiris Ioannou raised distortions in tax deductions for children, noting that where one of two spouses falls below the tax-free threshold, the other spouse should receive the tax relief.
EDEK MP Marinos Sizopoulos questioned whether the state intends to give additional tax incentives to specific categories of workers. DIPA MP Alekos Tryfonides said the party will make recommendations for changes to the tax-free threshold and tax bands. Greens MP Stavros Papadouris said the €1,500 tax deduction for housing loans is inadequate.
Tax Commissioner Sotiris Markides said for every €1,000 increase in the tax-free threshold, the state would lose €300 million in revenue. He added that if there is a revenue loss, the benefit must be targeted.
Lawyers and accountants oppose corporate tax rise
Lawyers, accountants and the Cyprus International Business Association (CIBA) voiced opposition to raising corporate tax from 12.5% to 15%.
The Cyprus Bar Association said the increase should not be implemented, noting there is no impact study. It also said the move does not strengthen Cyprus’s competitiveness.
The Institute of Certified Public Accountants (SELK) questioned why the increase cannot be applied at a later stage. A representative spoke of the economic impact, noting that if the increase is imposed, offsetting measures should be given, such as raising VAT on luxury goods.
CIBA said the corporate tax increase will negatively affect the economy and impact the country’s GDP. Some companies may leave Cyprus, it warned. It also proposed imposing property tax on assets above €3 million, as suggested by the Cyprus Employers and Industrialists Federation (OEB), and raising VAT on luxury goods.
Union anger over provident fund taxation
Trade unions expressed strong opposition to taxing the business activities of provident and pension funds.
Nikos Grigoriou, representing five major provident funds, said taxation will reduce fund returns, resulting in members receiving lower lump sums and pensions.
Tax Commissioner Markides stressed that the business activities of funds will be taxed at 15%.
“I challenge OEB and KEVE to come and tell us if it makes sense not to tax funds when they conduct business activities. Why should a provident fund open a supermarket and not be taxed?” he said.
He also asked for the views of employer organisations, the Registrar of Provident Funds and the State Aid Controller.
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