Support Group for Cyprus publishes its second Activity Report: Supporting crucial reforms

The Support Group for Cyprus (SGCY), which coordinates technical assistance requested by the country to help it implement specific reforms set out in its economic adjustment programme and develop new sources of economic growth, today published its 2^nd activity report

The report, which covers the year 2014, presents the state of play of its work in ten key policy areas: revenue administration, insolvency, energy, the budgetary framework and public financial management, healthcare, reform of immovable property tax, the welfare system, the business environment, competition, and public administration reform. In consultation with the Cypriot authorities, the Support Group put particular emphasis on advancing projects in the areas of revenue administration, insolvency and energy.

Having reached its full staffing levels with three experts based in the Cypriot administration, the Support Group will focus over the coming months on the implementation and conclusion of existing reform projects, and on rolling out longer-term projects that facilitate the diversification of economic activity.

More efficient revenue administration

The technical assistance provided to the Cypriot tax authorities supported the merger of the Inland Revenue Department and the VAT Services, with a view to strengthening their efficiency and effectiveness, based on a unified view of taxpayer affairs. The technical assistance provided jointly by the European Commission (Directorate-General for Taxation and Customs Union and the SGCY) and the International Monetary Fund (IMF) generated momentum for the conclusion of the merger on 1 July 2014 and the establishment of an integrated, functionally-organised, compliance-driven tax department. The European Commission and the IMF conducted approximately 40 technical assistance activities during 2014, including preparing for the launch of the new large taxpayer office on 1 January 2015 and the implementation of the action plan on tax debt collection.

A modernised regime for insolvency

The European Commission (Directorate-General for Economic and Financial Affairs and the SGCY), in conjunction with IMF and European Central Bank (ECB) experts (forming part of an Insolvency technical assistance team), provided considerable direct technical assistance in 2014 to the Cypriot authorities in the context of reforming and modernising the corporate and personal insolvency regimes. In particular, the Insolvency Technical Assistance Team prepared a comprehensive examination of the various policy, process, structural and technical issues involved in insolvency reform. This resulted in the preparation of five major bills designed to establish an efficient insolvency framework. Once in place, the new framework will enhance the prospects for the recovery of the Cypriot economy by helping to address the challenge of non-performing loans, bolstering financial stability and underpinning investor confidence.

Delivering a more competitive energy market in Cyprus

The SGCY supports the Cypriot authorities in their efforts to achieve compliance with EU energy legislation and Cyprus' commitments under its economic adjustment programme. To this end, a resident expert was made available to the Ministry of Energy, Commerce, Industry and Tourism on 1 April 2014. Offering consumers real freedom of choice at fair, competitive prices, stimulating clean energy production and improving security of supply provide the main guiding principles for the Support Group’s work. The SGCY’s energy team made a significant contribution to the Cypriot reform effort in the energy field in 2014 by initiating two large consultancy projects on renewable energy sources and energy efficiency and strengthening the cooperation between the Cyprus Energy Regulatory Authority and its European counterparts.

Background

The Support Group for Cyprus was launched by the European Commission in March 2013. It coordinates technical assistance requested by Cyprus to help it implement specific reforms set out in its economic adjustment programme, which aims to address the financial, fiscal and structural challenges facing the Cypriot economy. Furthermore, as part of its mission, the SGCY assists the Cypriot authorities in their efforts to stimulate new sources of balanced and sustainable growth. The SGCY has 12 members of staff, three of whom are based in Nicosia and embedded in the Cypriot administration.

The experts of the SGCY, in cooperation with the Cypriot authorities, assess the priority of technical assistance needs, help develop projects and mobilise sources of funding. Technical assistance projects can be funded from centralised technical assistance reserves of the European Structural and Investment Funds (ESIF) and from Cyprus’ ESIF technical assistance allocation. Cyprus has transferred part of its ESIF technical assistance funds for 2014-2020 to the Commission for this purpose.

A programme of technical assistance has been agreed and is regularly updated with the Cypriot authorities so as to respond to Cyprus' priorities. To this end, the SGCY has established close contacts with the relevant Cypriot ministries and the Cypriot Directorate General for European Programmes, Coordination and Development.

The Support Group draws on expertise and contributions from other services of the European Commission, from EU Member States and international organisations. The support of EU Member States and international organisations is coordinated through bilateral contacts and coordination meetings in Brussels and Nicosia.

Technical assistance coordinated by the SGCY should complement other EU or national initiatives. While some projects may deliver tangible benefits in the short-term, in many cases, reforms will translate into concrete improvements for Cypriot businesses or citizens over a longer period of time.

For more information:

The activity report is available on the website of the Support Group for Cyprus.