Gold Magazine June - July 2013, Issue 27 | Page 52

accounting

Do it! It Costs Nothing

I

CPAC has been adamant
about the need for
Cyprus to improve its
competitiveness as a business
centre by adopting pieces of
legislation which will add a
lot to what the country has
to offer without incurring any
cost. These include:
• Amending legislation to
attract QROPS and Islamic
Finance Structures.

• Amending Company Law to
allow for mergers with non-EU
companies.
• Finalising and introducing
Cell companies legislation.
• Finalising and introducing
Leasing legislation.
• Allowing for a change of
use of assets e.g. hotels may
be converted into flats, the
relevant taxes are paid and the
change is allowed.

and extremely competitive compared to that
of other jurisdictions such as Luxembourg,
Ireland, Malta, etc. Furthermore, the cost of
our services is lower, especially if you compare
it to countries like Singapore, the Netherlands
and Luxembourg. On top of that we are a
good destination to come and do business in
because of the sun, the sea and the weather,
while another part of the package is the
friendliness of our people. Friendliness counts,
even in business. Traditional Cypriot hospitality has a business value.
Gold: Are you saying that the Eurogroup’s
decisions have not damaged Cyprus’ business model too much?
T.P.: I think that the Europeans focused on
the big problems that Cyprus was facing and
not so much on our business model. We do
not have German, French or English companies here that have relocated from their home
countries. We do not pose a threat to other
European countries; they are not losing money because of Cyprus. Most of the investment
that comes into Cyprus is generated from
non-EU countries so, effectively, we are adding business to the EU instead of absorbing
business from them. If Cyprus can be a business hub for non-EU countries that want to
use the island as a base, I don’t think that this
is bad for Europe. Luxembourg, for example,
poses a more serious threat to some European
countries such as the UK. There is already
a lot of fuss being made in England on why
certain companies are not paying their taxes in
the UK. Cyprus is more focused on international business, not necessarily European. We
are focused on investments from the US and
Canada, for example, which are redirected
to Russia, India or China. Effectively we are
facilitating international business.
Gold: But there are certain things that
have to change…
T.P.: Of course! From now on we need to
play by the new rules. The Europeans believed
that we had a problem with our banking
model and they have tackled it by their decisions. Other than that, the Memorandum of

Understanding contains some
very good recommendations
for Cyprus. The increase in
the corporate tax rate is not
a huge issue for international
business. The same goes for
the increase in interest on deposits which can be viewed as
a controlling measure for the
size of the banking sector. The
main problem, as they saw it,
was the huge amount of de-

The MoU
contains some

very good
points which

will increase Cyprus’
competitiveness and
the efficiency and
effectiveness of the

banking
sector

posits coming to Cyprus and the management
of those deposits. We have to admit that our
management of the deposits was not the best.
A large part was directed to Greece and when
Greece defaulted we suffered from the concentration of risk in one country. All in all, the
MoU contains some very good points which
will increase Cyprus’ competitiveness and the
efficiency and effectiveness of the banking
sector. What was unfair about the MoU was
the bail-in tool they used for the first time in
Cyprus.
Gold: A large part of Bank of Cyprus will
now be owned by foreign investors who
used to be the bank’s depositors. What will
this mean for Cyprus?
T.P.: The largest part of the banking sector in
other business centres is owned by international banks. This is common practice. They have
the expertise and the muscle. For serving huge
international clients and their huge deposits, it
is clear that foreign banks are better equipped.
The new big sh areholders in Bank of Cyprus
are people who have experience and success in
business. If they have a significant part of the
Bank, the expectation is that they will take care
of this investment. They will direct business to
the Bank or they will look for a new investor.
From now on I believe we should be more
open to foreign investment. There is nothing negative in this as long as the supervisory

50 Gold the international investment, finance & professional services magazine of cyprus

authorities play their role in monitoring things
properly.
Gold: What are the lessons for the professional services sector to be learnt from the
latest developments in Cyprus?
T.P.: The main lesson is that we need to be
more space aware. What do I mean? We had
a tendency in Cyprus to think that we could
do everything, that there were no limits. We
wanted to obtain as much international business as possible without necessarily being fully
compliant. This does not work. We are part
of the EU, if we want to be a credible international business centre, we have to play by the
rules. We have to respect our partners and EU
laws. We need to be more compliant on all
fronts, this is the gist of it. For example, accountants and lawyers should ensure that they
file all returns and accounts with the registrar
of companies. On the other hand, the Government and the competent departments should
be tough. If companies do not adhere to their
commitments, they should impose penalties
and restrict the use of the business as they do in
other jurisdictions.
Gold: So adherence to the rules and regulations should not be considered as working
to the detriment of the business?
T.P.: Not at all! It should strengthen the business. Right now, some of the businesses which
are going to leave Cyprus are doing so because
of the bad reputation that Cyprus was given
by the international media and its European
partners regarding money laundering. This is
really a pity. We have a good product but right
now our investment environment is not clear.
That is why it is very important to change
our mindset. We need to understand that
greater compliance creates more international
business. We should also try and create more
substance for companies. All professionals
should be pushing in this direction because
this is the way to create more credibility. And
once we clarify the pending issues, we need to
go out and improve our image. We have some
very good examples that Cyprus should be
proud of, such as the shipping industry which
has not been affected by the recent “tsunami”
and remains an excellent advertisement for
Cyprus. We also have excellent prospects in
the energy sector and this needs to be given
more prominence in the international media.
We need to get out and advertise better. I also
want to stress that it is time to stop advertising
Cyprus as a good offshore location. We are not
an offshore location. We are an EU country
so we cannot be an offshore location. What
we have is a tax efficient international business
sector and therefore there are strict rules. In a
nutshell, we have to be more sophisticated in
the promotion of Cyprus.