A landmark agreement between the Cypriot government and three political parties has set the stage for the country’s first comprehensive tax reform in over two decades. After intense negotiations, Finance Minister Makis Keravnos secured a broad consensus with the Disy, Diko, and Dipa parties, creating a probable parliamentary majority for the sweeping changes. The proposed legislation, which aims to provide significant relief to households, is now on a fast track, with a target implementation date of January 1, 2025, and a crucial plenary vote scheduled for December 22.
The drive for reform emerges against a backdrop of a looming electoral cycle, with parliamentary elections due in approximately six months. The government has framed the overhaul as a long-overdue modernization of a system unchanged since 2002, emphasizing direct financial benefits for citizens. The core of the agreed-upon amendments focuses on elevating the tax-free income threshold from €19,500 to €22,000 and substantially expanding deductions for families with children. According to preliminary estimates from economist Tasos Yiasemidis, the fiscal impact of this adjustment alone will cost the state between €85 and €90 million in foregone revenue.
Detailed analysis suggests the relief will be considerable for many households. For instance, a family with two children and an annual income of €30,000 could see nearly €900 in annual savings, while a household earning €60,000 with four children may benefit by almost €2,800. The scale of relief increases with both income and family size, with a €100,000-income family of six standing to gain over €3,600 annually. "There is a great convergence of opinions," Minister Keravnos stated, underscoring the political alignment achieved in recent days.
However, the expedited process has ignited considerable controversy. Opposition parties, notably Akel, the Greens, and Elam, have been largely excluded from the decisive negotiations, leading to accusations of a rushed and opaque procedure that undermines parliamentary scrutiny. Akel MP Aristos Damianou launched a sharp critique, alleging that Disy and Diko were “organising sit-ins at the finance ministry with the aim of preventing the taxation of wealth, which we are proposing.” His party advocates for more progressive measures, including taxes on excess bank profits, a levy on real estate holdings valued over €3 million, and a reduction of VAT on electricity.
The political dynamics are further complicated by the support of Disy, traditionally the main opposition party, for the government’s bill. This alignment has raised questions about the nature of political opposition and has provided the administration with a clear path to passage through the House Finance Committee, chaired by Diko’s Christiana Erotokritou. With committee meetings running through the week, the legislative machinery is moving swiftly to meet the year-end deadline.
As the December 22 vote approaches, the reform’s passage seems likely given the assembled coalition. Yet, the debate has laid bare deeper ideological fissures regarding fiscal equity and the role of the state. While millions in tax relief are poised to reach Cypriot households, the government has not yet detailed offsetting revenue measures to counter the significant budgetary shortfall, leaving questions about long-term fiscal sustainability unanswered. The reform, therefore, stands not only as a economic recalibration but as a defining political maneuver in the pre-election landscape.