Tax certainty is the basis of a stable tax system serving both taxpayers and governments. But is there anything simple about tax? Can the tax system ever be uncomplicated?
Tax is a complicated subject and for every tax rule established, a way around would always be found. So, no, tax will never be simple or absolutely certain. However, there are ways to enhance a level of certainty in order to ensure a positive economic development.
- Simplifying the tax policy and legislation – a new concept for tax laws is needed.
- Encouraging predictability: Governments should be consistent when changing regulations and use a variety of institutions to help taxpayers become more involved and understand the changes better.
- Establishing an effective structure in solving disputes. These should be easily accessible to taxpayers and assisted by cooperative compliance processes – to give one example.
- Looking at the big picture of global tax uncertainty, there should be consistency when creating and implementing tax rules internationally. The taxpayer should also be involved in the process of becoming better educated about new tax regulations and more engaged in the implementation process.
From a taxpayer’s perspective, improving tax certainty for taxpayers means encouraging investment, trade and economic growth. It has been proved that uncertain corporate income tax and VAT are some of the determining factors in investment and location decisions.
Are you looking to invest in a location with relative tax system stability and consistency? Did you know that Cyprus has been quick to adopt the Common Reporting Standard (CRS) which automatically provides information of financial institutions based in Cyprus to other jurisdictions within the CRS network? Cyprus is also successfully advancing in the process of implementing the Base Erosion and Profit Shifting (BEPS) initiative. The latter, combined with a stable political system, makes Cyprus an ideal location for investors looking for more certainty in the tax system.