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Cyprus’s New Fiscal Framework: A Catalyst for Sustainable Growth and Social Equity

by THEFUTURE.TEAM

December 23, 2025

Introduction To A New Era

The recently approved fiscal framework, endorsed by the Cyprus House of Representatives, signals a transformative shift for the nation’s economy. According to Finance Minister Makis Keravnos, the reform is designed to sustain economic growth, enhance competitiveness, and provide substantial support to Cypriot families in the coming years.

Commitment To Modernization And Economic Resilience

The approval of this modern tax system is a milestone culmination of an extensive and demanding effort—one that was integral to the pre-election commitments of the Government of Nikos Christodoulides. The reform embodies a comprehensive policy to modernize society, boost entrepreneurial spirit, uplift the country’s international image, and improve the overall living standards of citizens. In doing so, it reinforces the economy’s resilience against future uncertainties.

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A Fair And Competitive Tax System

Set to be implemented on January 1, 2026, the new tax system promises a more equitable distribution of fiscal responsibilities while strengthening social cohesion. Minister Keravnos emphasized that the contemporary framework not only supports the real economy but also enhances the competitiveness of Cypriot enterprises, thereby attracting productive, high-quality foreign investments. The reform is strategically crafted to stimulate an environment conducive to business growth and innovation.

Targeted Relief For Families And Households

An important element of the reform is its targeted approach to personal taxation. By markedly reducing the tax burden on households—particularly those with children—the new framework offers tangible relief to vulnerable groups and the middle class, which is widely regarded as the backbone of both society and the economy. Such measures are crucial in reinforcing social stability and ensuring long-term prosperity.

Collaboration And Strategic Partnerships

Minister Keravnos extended his thanks to the numerous stakeholders whose hard work was pivotal in drafting, negotiating, and finalizing the reform. Key contributions came from the officials at the Ministry of Finance, the Cyprus University of Economics and Business’s research center, and various social partners. Furthermore, the cooperation of the members of the House of Representatives, including Chairwoman Christiana Erotokritou, and all parliamentary factions, was instrumental in refining the proposals under tight deadlines.

A Vision For Long-Term Growth

In conclusion, Minister Keravnos reassured both businesses and citizens that the newly established fiscal framework will serve as a foundation for a stable and growth-oriented tax system. This policy is expected to support long-term economic advancement, invigorate competitiveness, and safeguard the well-being of Cypriot families, ensuring that the nation remains steadfast on its path to modernity and prosperity.

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Rolls-Royce Raises Guidance As Defense And Power Systems Drive Growth

Rolls-Royce raised its full-year profit and cash flow guidance after reporting stronger-than-expected first-half results, supported by growth across its civil aerospace, defense and power systems businesses.

Underlying operating profit rose 46% year on year to £2.5 billion ($3.3 billion) in the first six months of 2026, while revenue increased more than 24% to £11.3 billion.

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The company now expects full-year underlying operating profit of £4.7 billion to £4.9 billion, up from previous guidance of £4 billion to £4.2 billion. It also raised its free cash flow forecast to £3.8 billion to £4 billion, compared with £3.6 billion to £3.8 billion previously.

Shares rose as much as 6% in early trading before paring gains to trade about 4% higher.

Data Center Demand Supports Power Systems

Chief Financial Officer Helen McCabe told CNBC that orders in Rolls-Royce’s data center power business increased by more than 50% in the first half as operators invested in backup and on-site power systems.

The company has benefited from growing demand for power infrastructure as data center operators expand capacity.

Defense Spending Provides Additional Support

McCabe also said Rolls-Royce expects to benefit from higher defense spending in the U.K. and across NATO countries. She cited the U.K.’s long-term defense investment plan, which provides funding visibility through 2030 and beyond.

“We’ve had very positive initial conversations with the new government,” McCabe said, adding that the company supports its focus on growth, defense and industrial manufacturing.

Turnaround Continues

Chief Executive Tufan Erginbilgic said the company’s transformation strategy continued to deliver results. “Our transformation continues to deliver,” he said in a statement. “We have unlocked new growth opportunities across the Group.”