Minister’s proposal of corporate tax reforms causes strong reaction from Cyprus business community
NICOSIA, Aug. 7 (Xinhua) — Cypriot Finance Minister Harris Georgiades’ proposal of a major reform of corporate taxation has triggered strong objections from entrepreneurs, who fear that it would lead to an increase of their total tax burden.
Georgiades said on Wednesday that his proposal, which included taxation on offshore companies, was not made as a means of increasing government revenue, but to bring taxation in line with international standards, so as to facilitate bilateral agreements with other countries for the avoidance of double taxation.
“It may lead to an increase in corporate taxes that may affect offshore companies, but in the long run it may help attract more offshore firms to Cyprus,” he told state radio, explaining his move.
He said Cyprus has been on various black lists because of its low rate of corporate tax, and has also been at the receiving end of European Union criticism for unfair competition in attracting offshore firms through a low tax rate.
“A careful rise to 15 percent from the current 12.5 percent would resolve such issues drastically,” he said.
The minister also tried to allay concerns, saying that the state would collect an extra 170 million euros a year through the increased taxation, but would be returning some 200 million euros in the form of other tax breaks.
According to the scenario, the government would cut defense contributions from 17 percent to 15 percent, tax on interest rates from 30 percent to 15 percent, and capital gains tax from 20 percent to 15 percent.
It will also scrap an annual fee of 350 euros paid by every company, and stamp duties.
According to the scenario, individuals would get a higher break on contributions to pensions, social insurance, and insurance.
Marios Tsiakkis, secretary general of the Cyprus Chamber of Commerce (KEBE), said KEBE would be willing to seriously consider a comprehensive proposal to reform the corporate taxation system if the minister came up with concrete proposals for tax breaks, including a low tax rate for firms reinvesting their profits.
Georgiades said his proposal was not a final one and he could discuss with the business community ways to offset the increase on corporate through other breaks.