The International Monetary Fund (IMF) has published on its website a Letter of Intent from Cyprus, together with a Memorandum of Economic and Financial Policies and Technical Memorandum of Understanding, in connection with a request for financial support from the IMF.

In the letter Cyprus outlines progress towards the objectives of its economic program. This includes reforms in the financial sector, pursuing a prudent fiscal policy and going ahead with structural reforms, including particularly the reform of the tax administration, managing fiscal risks and reforming public administration.

Cyprus points out that the reform of the tax administration is progressing. Legislation has been passed to integrate the two tax authorities into one Department of Taxation and the tax collection enforcement powers have been strengthened.

Reform efforts are focusing on dealing with tax arrears and tax evasion. The tax debt recovery plan has been finalized and will become a part of the tax compliance improvement strategy. Use of the bank garnishing powers has begun on a pilot basis and quarterly implementation reports are to be prepared outlining the groups of taxpayers targeted, the enforcement measures employed to collect the tax, and the amount of tax debt recovered. The first of the progress reports is to be prepared by the end of June 2015.

The reform of the revenue administration includes the establishment of a new Large Taxpayer Office (LTO) to deal with 40% of the revenue collection. By the end of 2015 the LTO will be in full operation with compliance activities, risk assessment and taxpayer services. Human resources will be allocated to the LTO to expand the coverage to 50% of revenue collections. A new tax procedures code will establish an integrated legal framework for tax procedures and this is due to be approved by the Council of Ministers by the end of September 2015.