The IMF has published on its website a Letter of Intent prepared by Cyprus in connection with a request for financial support. The Letter of Intent includes an updated Memorandum of Economic and Financial Policies that outlines policy Cyprus is implementing in the financial sector including a structural reform agenda. This agenda includes public administration reform and restructuring of tax administration.

Cyprus aims to finalize the integration of the two tax authorities into a unified Department of Taxation by the end of June 2016, and to enhance tax collection. There are arrears of tax returns that have not yet resulted in assessments and could give rise to substantial tax revenue. A project team is to be established by the end of September 2015 to identify the size and nature of the potential assessments based on these tax returns and establish the amount of taxes and refunds due.

Cyprus is continuing to implement a debt recovery plan that includes the use of new enforcement powers to obtain revenue owed. The first quarterly implementation report was prepared in June 2015 and sets out the targeted taxpayer groups, the measures used to enforce and collect the tax and the amount of debts recovered.

As part of the tax administration reform a single registration process is to be established for all domestic taxes by the end of September 2015. The process of tidying up the taxpayer register will be completed by the end of December 2015. Also by the end of December the Large Taxpayer Office (LTO) first set up in January 2015 will be fully functional and carrying out taxpayer services, risk assessment and compliance activities to broaden revenue collection.

A new tax procedures code is to be drawn up to provide an integrated legal framework for tax procedures. This is to be approved by the Council of Ministers by the end of December 2015. During the integration process the Performance and Monitoring Unit will prepare a monthly update of performance indicators covering registration, filing, payment and debt collection. A quarterly assessment report will be drawn up on the basis of these monthly reports for the purpose of analyzing performance and identifying actions that need to be taken to improve the process. The first of these reports will be prepared by the end of October 2015. Changes may also be made to the legal framework under which the criminal tax investigation unit operates to introduce judicial oversight.