Green taxation and countervailing measures are the current focus of a tax reform project led by the Economic Research Center (KOE) of the University of Cyprus. The second phase of the multi-year project, expected to conclude by March 2024, is examining the impacts of these measures on households and businesses.
Giorgos Syrichas, a KOE economist serving on the project’s advisory committee, explained that the project is assessing the potential effect of green taxes on water, fuel, and waste, with a particular emphasis on various household income levels, family dynamics, and vehicle ownership. Businesses will undergo a similar evaluation.
This green taxation, Mr. Syrichas clarified, will not impose a burden. “The state will have revenue from the imposition of green taxation…and this revenue should be given back”, he explained, emphasizing the ideal of fiscal neutrality. Countervailing measures, such as refunds or incentives to promote the green transition, are being devised to mitigate adverse impacts.
The findings and proposals for compensatory measures will reportedly be given to the Ministry of Finance, aligning with Cyprus’ European obligations and the objectives of the Recovery and Resilience Fund scheduled for implementation in 2024.
Regarding the broader tax reform project, Mr. Syrichas shared that related project phases on macroeconomic trends, global best practices, and Cyprus’ existing tax system are nearing completion, with all results expected by March. Future efforts will involve bilateral consultations, legislative regulation identification, and empirical data analysis.
Ultimately, the goal of the project is to create a transparent and efficient tax system that supports economic growth, fosters innovation, reduces inequality, and facilitates Cyprus’ transition to a green and digital economy.
