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IMF Advises Cyprus Against Taxing Data Centres And Cryptocurrency Mining

by THEFUTURE.TEAM

August 26, 2024

In its latest economic assessment of Cyprus, the International Monetary Fund (IMF) has issued a strategic recommendation urging the Cypriot government to avoid imposing taxes on data centres and cryptocurrency mining. The IMF’s advice is rooted in a broader vision to position Cyprus as a hub for technological innovation and digital economy growth, rather than stifling these nascent industries with potentially burdensome taxes.

The IMF’s analysis underscores the importance of data centres and cryptocurrency mining as critical components of the digital economy, which Cyprus is increasingly looking to develop. Data centres serve as the backbone of the digital infrastructure, supporting everything from cloud computing to the storage and processing of vast amounts of information. Similarly, cryptocurrency mining, although controversial in some circles due to its environmental impact, represents a growing sector of the financial technology industry that has the potential to attract significant investment.

By advising against taxation, the IMF highlights the potential risks of discouraging investment in these industries at a time when Cyprus is seeking to diversify its economy and reduce its reliance on traditional sectors such as tourism and real estate. The IMF’s position suggests that premature or excessive taxation could deter international companies from establishing data centres in Cyprus or engaging in cryptocurrency mining operations, thereby missing an opportunity to position the island as a leader in the digital economy.

Instead, the IMF advocates for a regulatory environment that encourages innovation and investment. This approach includes creating incentives for companies to establish operations in Cyprus, offering support for research and development, and ensuring that the regulatory framework is flexible enough to adapt to the rapidly evolving nature of the technology sector.

For Cyprus, which is already positioning itself as a business-friendly jurisdiction with favourable tax policies, the IMF’s recommendation aligns with the broader national strategy of attracting foreign direct investment and fostering economic growth. The island nation, with its strategic location, robust legal framework, and skilled workforce, has the potential to become a regional hub for digital industries, provided that the right policies are in place.

Illegal Employment on the Rise in Cyprus as Undeclared Work Declines

by THEFUTURE.TEAM

September 16, 2024

A recent report on the labour market in Cyprus has revealed a worrying increase in illegal employment, even as the rate of undeclared work shows signs of decline. The findings, which were discussed during a parliamentary session, have raised concerns among lawmakers and authorities alike about the ongoing challenges in combating labour exploitation and maintaining fair employment practices.

According to data presented by the Ministry of Labour, the issue of illegal employment—workers being hired without proper work permits or contracts—has escalated in recent months. This rise comes at a time when efforts to reduce undeclared work, where employees are not registered or insured, have seen moderate success. Despite progress in regulating the labour market, illegal employment remains a significant issue, especially in industries such as construction, agriculture, and hospitality.

Understanding the Distinction Between Illegal and Undeclared Employment

Illegal employment refers to the hiring of individuals who are not legally permitted to work, often due to their immigration status or lack of proper documentation. These workers are typically vulnerable to exploitation, receiving lower wages and lacking access to basic protections such as healthcare and social security benefits. In contrast, undeclared work involves the employment of individuals who may be legally allowed to work but are not officially registered, depriving them of insurance coverage and other legal protections.

While authorities have made strides in reducing undeclared work, particularly through stricter inspections and penalties, the rise in illegal employment presents a new challenge. Lawmakers pointed out that illegal employment poses even greater risks, as it not only harms the workers involved but also undermines the integrity of the labour market and contributes to unfair competition among businesses.

Factors Driving Illegal Employment

Several factors contribute to the increase in illegal employment, according to the Ministry of Labour. One key driver is the influx of migrant workers, many of whom lack the necessary documentation to work legally in Cyprus. Without proper channels for legal employment, these individuals often turn to unregulated jobs where they are vulnerable to exploitation.

The growing demand for cheap labour, particularly in sectors like construction and agriculture, also plays a significant role. Employers seeking to cut costs may resort to hiring illegal workers, bypassing the legal requirements for contracts, wages, and benefits. This practice not only puts workers at risk but also creates an uneven playing field, where businesses that comply with legal standards struggle to compete with those exploiting illegal labour.

Efforts to Combat Illegal Employment

In response to these findings, the government has pledged to intensify its efforts to combat illegal employment. This includes increasing inspections, imposing harsher penalties on employers found guilty of hiring illegal workers, and strengthening collaboration with immigration authorities. Additionally, there is a push to create more pathways for legal employment for migrant workers, ensuring they can enter the labour market with proper documentation and protections.