Cypriot Presidency urges more harmonised fiscal policy; ‘It can boost EU growth’

Brussels – “Fiscal policy can become one of the strongest pillars of economic dynamism in the coming years,” capable of driving the European competitiveness agenda and bringing about the twin green and digital transition. Makis Keravnos, Minister of Finance of Cyprus, the country currently holding the rotating presidency of the Council of the EU, is convicted of this. However, for this potential to become a reality, a new impetus is needed to bring the various national policies more into “alignment”, he emphasised at the Tax Symposium organised by the European Commission. 

Harmonisation means making tax systems less national and more European – a necessary step, according to Cyprus’s Minister of Finance. Because he laments, “different regulatory frameworks and differing interpretations create barriers, particularly for small and medium-sized enterprises that wish to expand across borders.” As a result, players in the economic and productive sectors are unable to innovate. Hence, “simplification is not merely a bureaucratic convenience, but a facilitator of growth.”

 Keravnos uses the twelve-point agenda to give a glimpse of the scope of prudent fiscal policies: “When well-designed, taxes can attract private capital into research and development, digital transformation, and the green transition,” he emphasises, citing the key EU priorities under the leadership of Ursula von der Leyen. The European Green Deal, centred on investment in clean-tech and advanced solutions, is all of this. However, research and development also concern the defence sector, which is increasingly strategic and a priority. 

Governments must, therefore, move away from outdated thinking. According to the current Ecofin President, given that Cyprus currently holds the EU Council presidency, “taxes must not only finance public spending, but also encourage innovation and support growth.” This means providing incentives where needed and cutting back where possible. These suggestions complement the European Commission’s proposals – which, incidentally, are nothing new in the Italian context – to reduce the tax wedge on labour. If we truly want to drive EU growth and competitiveness, there is no alternative, according to Keravnos: “Fiscal policy is often perceived as complex and technical, yet it shapes the incentives that guide economic behaviour, influences investment choices, and the model of industrial development.” That is why fiscal policy can be a major driving force, but only “if we manage to modernise and simplify our tax systems,” the minister points out.