The Proposed Reforms of the Cyprus Tax Structure: Who Really Benefits?

Abstract

This paper intends to highlight the main features of the revised Cyprus tax law and to provide some food for thought regarding its effects on households, businesses and society in general. The new tax laws will reduce the average tax rate of middle­ income and upper-income earners. The low-income earners' average tax rate remains unchanged at zero per cent. The increase in the personal allowance will make income tax Jess progressive. The extent to which the increases in VAT and other indirect taxes will shift the burden of taxation from the better off to those worse off depends on the size of the benefits the government will give to low-income earners, the extent to which higher indirect taxes are passed on to consumers in the form of higher priced goods and services, as well as the price-elasticity of demand for both low- and high-income earners.