ECONOMY

Cyprus opposes global minimum corporate tax

cyprus-opposes-global-minimum-corporate-tax

Cyprus has joined Ireland in opposing US President Joe Biden’s idea of a global minimum corporate tax.

Interrogated by members of the European Parliament’s Committee on Economic and Monetary Affairs, Cypriot Finance Minister Constantinos Petrides said that Cyprus opposed both Biden’s proposal for a minimum corporate tax and a recently reached deal by MEPs on improved transparency for tax reporting. “Mr Petrides insisted that taxation matters were a national competence and efforts going on at global and EU level risked undermining this principle,” according to the committee’s Thursday press release.

“We are in favor of retaining the policy of setting the tax rate as a national competency, maintaining a level of corporate tax rate suitable for the sustainable development of the economy and investments,” Petrides said, according to The Guardian. He did not explicitly say whether Cyprus would veto an EU resolution backing Biden’s plan.

Last week, in an interview to Sky News, Irish Finance Minister Paschal Donohoe said: “We do have really significant reservations regarding a global minimum effective tax rate status at such a level that it means only certain countries, and certain size economies can benefit from that base – we have a really significant concern about that.” 

Donohoe predicted that Ireland will maintain its 12.5% corporate tax rate for many years to come.

Cyprus also has a 12.5% corporate tax rate, while Hungary’s is 9%.

Biden had initially proposed a 21% minimum corporate tax rate, before whittling it to 15% after he received significant pushback.

Commentators favorable to the Biden plan have written that, by opposing it, Cyprus risks becoming a “pariah state,” although they assume Ireland will, in the end, come on board, which is far from certain.

“There might be some sympathy for Petrides if the history of investment in the southern half of the divided island, sometimes called Moscow-on-the-Med, was less closely linked to Russia via a favourable tax treaty and a significant Russian enclave in the second city, Limassol,” Observer economics editor Phillip Inman wrote at sister paper The Guardian.