Cyprus and Luxembourg enhance their economic corporation

Cyprus and Luxembourg enhance their economic corporation

Cyprus and Luxembourg make further steps to enhance their economic corporation by signing the Treaty of for the elimination of double taxation with respect to taxes on income and on capital and the prevention of fiscal evasion and fiscal avoidance. The Ministers of Finance of Cyprus and Luxembourg Mr Harris Georgiades and Pierre Gramegna signed today, in Lefkosia, the Treaty, thus expanding the economic and commercial ties.

Speaking to the Press, Minister Georgiades said that today’s meeting and discussion was very useful. “I mentioned how significant and credible the standing of Luxembourg within the EU is. I have no hesitation in saying, as a small economy like Luxembourg, we are very keen to follow your lead and to expand the prospects for cooperation between us.

The signing of the Double Tax Treaty just a few minutes ago opens the way for further expanding these economic and commercial ties, building on the excellent political ties that we enjoy. So thank you very much and thank you for being present to Cyprus”.

On his part, Mr Gramegna highlighted: “It is a great honour and pleasure to be back to your country only for the second time, I must say. I was here back in 2004, accompanying our then Prime Minister Jean Claude Juncker and the Foreign Minister, with a business delegation. Today, I am glad to be back here for a double reason, that is to meet my colleague and good friend, Harris Georgiades, whom I meet every month in Brussels and Luxembourg for the Eurogroup and the ECOFIN.

The second reason is Luxembourg having being chosen to chair the Governors meeting of the EBRD, I am glad to be here in Cyprus for that event that we will chair on Wednesday.

The two events show that the relationship between Cyprus and Luxembourg has not only bilateral connotation but also an international framework. The fact that the EBRD is meeting here in Cyprus in 2017 is paying tribute of the international role of Cyprus, on the one hand, and also helps to show the world that Cyprus has come out of the deep crisis of 2012-2013 in a very spectacular manner. That has allowed getting out of the helping program of the EU sooner. Congratulations Harris to you, for achieving that following these issues at the EU level for other countries. I know how difficult it is. There is a lot of appreciation for the speed and depth, with which Cyprus has applied the agreement that the EU signed four years ago.

I had the pleasure to join the Eurogroup in the end of 2014, and get to know Harris at that time. I am very glad that today we can sign a Non Double Taxation Agreement together. Luxembourg has signed Non Double Taxation Agreements with all the countries of the EU and Cyprus was the missing link. So I am glad that today, we were able to complete the picture and have such Treaties with all members of the EU.

A Non Double Taxation Agreement is very important, because it will boost the bilateral relations for goods and services, because it makes trade more efficient. This being said, we have the chance, both our countries, to be in the EU and the EU Single Market. So there are no obstacles in trade, and now with the Non Double Taxation Treaty there are also no obstacles in having two legislations applicable and make business difficult.

Cyprus and Luxembourg really have in common that are very open economies, open to trade, open to the world and which capitalized on the existence of the EU Single Market. We tend to take this EU Single Market for granted, but at the latest with Brexit, we all suddenly realized how important the EU Single Market is, because when you are about to lose it, you have all your companies telling you how bad it would be to lose it. So, let’s not take it for granted and let’s continue to develop this EU Single Market, which makes Europe strong.

Let me also say that I am very pleased that the EBRD meeting is taking place here in Cyprus. EBRD has also been an important actor, contributing to the financing of programs to help Cyprus in the difficult period and in 2014 Cyprus could become a beneficiary of the credits of the EBRD and to be in this country today also illustrates the important role this international financial institution has played”.

Invited to say what the EU initiatives regarding corporate taxation are, Cyprus Finance Minister replied: “Cyprus has a very cautious stance on this issue. On the one hand, we fully acknowledge that EU integration especially on economic policy should continue. We did have a discussion with the Minister on European politics, following the election of Emmanuel Macron as the new French President. I must say that we are both encouraged by the fact that a pro-European leader has been elected. This should give a new impetus to the European unification process. We should include aspects of economic policy. That said, let me say once again that Cyprus believes that we should be very cautious and very careful when it comes to corporate taxation.

On the one hand we are firm believers in being fully compliant with fiscal rules, maintaining a balanced budget. On the other hand, we do not believe that the European integration should deviate from the very sound reasonable principle of subsidiarity, that is decisions being taken to the level closest to the citizens and corporate taxation has been a national prerogative and should remain as such.

This is our stance. However, we do remain open to participate in the EU wide discussion on this issue as on any other policy initiative”.

Replying to the same question, Minister Gramegna said that “We share the concern just expressed by the Minister of Finance of Cyprus, when he says that we have to be cautious in the discussion of this new proposal of directive, which aims at having a common corporate tax space in EU level.

In my country, the Parliament has issued an advice, comment, which was sent to the European Union, asking for clarification to what extent this directive meets the principles of proportionality and subsidiarity. Proportionality and subsidiarity meaning that Europe should concentrate on what it can do better together compared to what we could do on its own.

This proposal being on the table, as always, Luxembourg is going to work together with all the players, that is the Commission and the EU members, but having in mind as was also reminded that in terms of taxation the principle of unanimity is foreseen in the Treaty.

Last thing, we have to see this initiative in a broader context. Common corporate tax base inside the EU must be seen also in the wider context of the OECD or even the world”.

Asked whether Luxembourg is interested in the EBA base moving from London to Luxembourg, the Minister of Finance of Luxembourg said that his country remained silent on the subject until Article 50 was triggered by the UK. After that our Prime Minister has sent a letter to the Commission and the President of the Council, saying that Luxembourg was a candidate to host the EBA and we are in fact motivated by this on the basis of the Treaty of 1965, which is organizing the legal situation around all the Headquarters of the EU institution./IBNA