**NICOSIA** – Crucial tax reform negotiations in Cyprus have ground to a halt, with opposition party Akel’s insistence on reintroducing wealth taxation measures proving to be a significant stumbling block. The Finance Ministry has firmly rejected the party's proposals, casting doubt on the government's ability to enact its comprehensive overhaul of the tax system by the end of the calendar year. The impasse is set to culminate in a contentious vote at the House plenum next Monday, December 22nd, where the fate of these wealth tax proposals, and potentially the broader reform, will be decided.
The core of the disagreement lies with two legislative initiatives put forward by Akel, aiming to impose new levies on high-value assets. The first proposal targets immovable property, advocating for an annual 1% tax on real estate holdings exceeding €3 million. This measure directly challenges the existing fiscal landscape, given that a wealth tax on immovable property was abolished in 2017. Akel's second proposal seeks to implement a tiered annual levy on registered companies possessing substantial assets. This levy would range from €350 to €1,250 for companies with assets valued between €1 million and €2 million, ostensibly designed to capture contributions from entities with significant financial reserves.
However, the Finance Ministry has unequivocally dismissed Akel's propositions. Officials from the ministry argue that these proposals were thoroughly considered and ultimately deemed unsuitable during the initial development stages of the tax reform. A key point of contention raised by the ministry concerns the potential for double taxation. They contend that reinstating any form of property tax would necessitate extensive deliberation to ensure it does not overlap with existing municipal taxes already levied on properties. Furthermore, the ministry has expressed reservations about the specifics of Akel's property tax proposal, highlighting a perceived lack of clearly defined tax brackets and insufficient justification for the proposed €3 million threshold.
Despite the government's staunch opposition, Akel has signalled its determination to bring its wealth tax proposals before the House plenum for a vote. This move underscores the party's commitment to its fiscal agenda and its willingness to confront the government on this contentious issue. The legislative deadlock not only threatens to derail the government's ambitious timeline for tax reform but also illuminates the deep ideological chasm between the ruling administration and opposition parties regarding equitable wealth distribution and taxation strategies.
The coming days are critical for the future of Cyprus's tax landscape. The vote on Monday will reveal whether Akel can garner sufficient support to advance its wealth tax agenda, or if the government will succeed in pushing through its reform package without these controversial additions. The outcome will have significant implications, potentially delaying or even jeopardising the comprehensive tax reforms the government had hoped to implement imminently. The debate over how to best tax wealth and ensure fiscal fairness is clearly far from over.