Nicosia, Cyprus. Cypriots are among the strongest supporters in the European Union of tougher action against tax evasion and avoidance, with 64 per cent identifying it as the bloc’s leading tax priority. The figure was the second highest in the EU, behind France at 65 per cent.
EU tax priorities
The European Commission’s annual report, published last week, showed that Portugal followed Cyprus with 61 per cent support for prioritising action against tax avoidance and evasion, while Finland recorded 60 per cent.
Across the EU, 54 per cent of citizens ranked tackling tax avoidance and evasion above all other tax policy objectives, according to the accompanying EU tax survey. Preventing double taxation between member states was selected by 26 per cent, resolving cross-border tax disputes by 23 per cent, supporting the green transition through taxation by 19 per cent and further digitalising tax and customs procedures by 16 per cent.
Estonia was the only member state where preventing double taxation was the top priority, supported by 40 per cent of respondents, compared with 36 per cent who prioritised action against tax avoidance and evasion.
Tax compliance gaps
The findings come as the European Commission estimates that the EU’s VAT compliance gap reached €128 billion in 2023, representing the difference between expected VAT revenues and the amount actually collected.
Its latest tax gap report also estimated that the average corporate income tax compliance gap across 23 member states was equivalent to 10.9 per cent of collected corporate tax revenues.
The Commission said stronger data collection, digital reporting systems, artificial intelligence and closer cooperation between national tax authorities could help reduce the losses.
Tax revenues in Cyprus
EU governments collected €7.1 trillion in taxes in 2024, an increase of 5.6 per cent from the previous year. The tax-to-GDP ratio rose from 39 per cent to 39.4 per cent, according to the Commission’s latest tax data.
Cyprus recorded a tax-to-GDP ratio of 36.3 per cent in 2024, up from 36.2 per cent in 2023 and 34.3 per cent in 2022. The ratio is estimated to have reached 36.7 per cent in 2025 before falling to a projected 35.9 per cent in 2026.
The composition of taxation in Cyprus has changed considerably over the past decade. The share of labour taxes in total tax revenues increased by 8.2 percentage points between 2014 and 2024, largely due to higher social security contribution rates and broader contribution bases.
Cyprus also recorded the EU’s largest increase in the implicit tax rate on labour over the same period, rising by 8.8 percentage points. The increase was 3.4 percentage points in Greece and three percentage points in Spain.
