Cypriots are among the European Union’s strongest supporters of tougher action against tax evasion and avoidance, with 64% saying it should be the bloc’s top tax priority.

According to the European Commission’s annual report published last week, Cyprus ranked second only to France, where 65% of respondents prioritised tackling tax evasion. Portugal followed at 61%, while Finland recorded 60%.

Follow THE FUTURE on LinkedIn, Facebook, Instagram, X and Telegram

Tax Evasion Tops EU Priorities

Across the EU, 54% of respondents said combating tax avoidance and evasion should be the Union’s main tax policy objective.

Preventing double taxation between member states ranked second at 26%, followed by resolving cross-border tax disputes (23%), supporting the green transition through taxation (19%) and further digitalising tax and customs procedures (16%).

Estonia was the only member state where preventing double taxation ranked ahead of tackling tax evasion.

Billions Lost To Tax Gaps

The survey comes as the European Commission estimates the EU’s VAT compliance gap reached €128 billion in 2023, representing the difference between expected VAT revenues and the amount actually collected.

The Commission also estimated that the average corporate income tax compliance gap across 23 member states amounted to 10.9% of corporate tax revenues.

It said stronger data collection, digital reporting, artificial intelligence and closer cooperation between national tax authorities could help reduce those losses.

Cyprus’ Tax Profile

EU governments collected €7.1 trillion in tax revenues in 2024, with the overall tax-to-GDP ratio rising to 39.4%. Cyprus recorded a lower ratio of 36.3%, up slightly from 36.2% in 2023.

Corporate taxation continues to play a significant role in Cyprus, accounting for 19% of total tax revenue in 2024, the third-highest share in the EU after Ireland and Malta.

The report also noted Cyprus’ decision to increase its corporate tax rate from 12.5% to 15% in line with the global minimum tax framework. It highlighted additional measures aimed at tackling aggressive tax planning, including a 17% withholding tax on certain payments to companies in jurisdictions listed by the EU as non-cooperative and a new corporate residency test based on incorporation.

Filing Tax Returns

Across the EU, 52% of respondents described filing their tax returns as easy, while 22% found the process difficult.

In Cyprus, 51% said filing was easy, although 12% relied on an accountant or other tax professional. More than 15% of respondents in Cyprus, Germany and Ireland also described the support provided by their tax authorities as “very inadequate”.