ADDRESS BY THE CHAIRMAN OF THE ICPAC Mr. PIERIS MARKOU We need a modern and effective Tax Transformation

I have the pleasure and honour to welcome you to the 62nd Annual General Meeting of the Institute of Certified Public Accountants of Cyprus. Special thanks go to His Excellency the President of the Republic, Mr. Nikos Christodoulides, who, despite his busy schedule, is with us today to address our Annual General Meeting. This fact is indicative of the importance that the State attaches to the work and mission of ICPAC and its members.

As you all know, this year's AGM coincides with many developments, both at international, European and local level, which in one way or another affect the professional services sector, the image and reputation of the country and the general economic activity and attraction of businesses in Cyprus.

Economy

Starting with the economy, we note that, in the post-pandemic era and, after 15 months of war in Ukraine with all of its consequences, the growth rate of the economy is running at 3.4% for the first quarter of 2023, unemployment is limited to 5%, inflation for the first four months of the year is at 6%, while public debt shows a continuous downward trend with the expectation that it will close to 81% of GDP at the end of the year. The initial reading leaves a positive feeling, compared to last year's corresponding period, while energy costs, supply chain costs and disruptions, the cost of money and ever-rising interest rates, costs and forms of employment, and persistent inflation remain high, which has a clear impact on the potential of public and private finances. The above factors have a negative effect on the course of our economy, creating tendencies of slowdown in growth. In particular, the increase in interest rates in an effort to contain inflation at a pan-European level, makes the cost of money unprofitable for new investments and new economic activity, while putting even more pressure on existing borrowers and the ability to repay their loans.

Services Sector

This period, in our view, revealed how sensitive but at the same time important the services sector is for the Cypriot economy. It is not immune to external pressures and developments, while its further development is regulatory and regulatory framework.

Dear friends,

We have before us today an extremely important opportunity, I would say unique, to apply what we have learned from the lessons of the last decade.

Therefore, the State and the private sector must cooperate, in a coordinated and structured manner, accelerating the transformation of the economic and operational structure of the State and business activity, on the basis of advanced technology, good administration, innovation, competitiveness and the resilience of the economic structure.

Economic Sanctions

To confirm what I have just mentioned, is the implementation of sanctions against Russia and the inclusion of natural and legal persons from Cyprus in sanctions lists of countries such as the United States and the United Kingdom, something that changed the scene as we knew it until today. ICPAC, as the competent authority, carefully monitors developments from the very beginning, taking a number of actions and initiatives both to inform and train our members, as well as to strengthen our supervisory role. Seamlessly and methodically, we exercise the role entrusted to us by the State, having regular contacts with various units both within and outside of Cyprus, being in contact with the other competent authorities of the Republic. We have publicly expressed our support for the establishment of mechanisms at State level for the most effective control of sanctions and beyond, through a framework that will enhance coordination, cooperation, guidance, legal clarity, as well as prosecution of all those who break the law.

Under no circumstances will ICPAC accept members and licensed entities to vilify the reputation of our profession and the image of the country.

Your Excellency Mr. President

I would like to confirm everything we said during our meeting held in your office last April, as well as what was conveyed in our letters that have been communicated to the Government and Parliament.

We believe that we now have the opportunity to turn this challenge into a new opportunity by turning our weaknesses into points of superiority.

To do this, it would be wise to adopt the good practices and examples of more advanced countries, establishing a higher authority at state level to take on the overall task of monitoring and implementing sanctions, while supporting the work of individual sectoral authorities in exercising their own competences.

Our humble request, however, is that the individual supervisory authorities should be able to participate effectively and efficiently in the consultation process for the design of this new authority.

Ladies and gentlemen

Reforms

We stand at a pivotal point for substantial change and readjustment. All the above support the urgent revision of the economic and business model of the Cypriot economy, for its immediate and necessary survival. There is therefore an urgent need for the swift implementation of horizontal reforms such as those of the public sector, the tax system, sustainable development and the green transition, labour issues, local government and the justice sector. We have submitted a relevant letter to the Government in April with our specific proposals for the further development of the economy.

Tax Reform

Let me first start with the Tax Transformation, as we like to call it. For a few years now, and from this very podium, we have been expressing our strong view that the time has come to reform our tax system.

We say Transformation instead of just reform, because, in our view, what we have to do is the transition and transfrom the existing system into a new one, modern, more relevant and connected to today's fiscal, social and business life. A new system that will include not only the obvious (such as rates, tax base and incentives), but also the operational, digitalisation, administrative and institutional framework. The aim is for the Tax Transformation to be a modern and effective tool for the fiscal, investment, development and social policy of the State. To be the overlay of the national long-term strategy for the country's sustainable development, as elaborated by the Economy and Competitiveness Council, known as "Vision 2035".

Mr President,

We welcome your public announcements on the tax transformation, as well as those of the Minister of Finance which are in the same direction, for its timely elaboration. As ICPAC we are present to help in any way required.

But please allow me point out that, although we had the impression that we would receive your invitation to start the relevant debate, we have nevertheless been informed that the study for this project has recently been commissioned to an academic institution.

Although this is an important first step towards the transition from political announcements to action, after some time, we nevertheless maintain the strong conviction that ICPAC's presence, as the competent body on taxation issues, based on the many years of know-how and expertise of its members, in the planning and organization of the project is a sine qua non.

I could submit from this podium an anthology of individual proposals, recommendations and suggestions for the revision of our tax system, but that is not my purpose today. We do not believe that a simple redistribution of rates and compensatory measures constitutes reform. We insist on the view that a coherent, horizontal and holistic approach is needed, re-evaluating both the environment in which we live and operate as well as international imperatives and developments.

We declare our long-standing readiness to make concrete proposals and to contribute effectively to the evolution of our tax system.

Digital Transformation

Dear friends, No reform effort will succeed unless it is supported by the digital transformation. It is perhaps the biggest bet Cyprus has to win today. Admittedly, some steps have been taken in recent years, but there is still a long way to go. The State is called upon to deal with bureaucracy, outdated infrastructure and labyrinthine procedures, the delay in serving the citizen and the inconvenience of investors and businesses, which hinder the development of the economy and society.

We expect that my friend the Deputy Minister of Research, Innovation and Digital Policy will ensure that the procedures and actions of his Deputy Ministry are accelerated, so that we can have tangible results within set timetables. Living in the era of globalization and digitalization, Cyprus' capability to act is not limited to its narrow geographical boundaries, but reach the limits of technology. The "small" Cyprus is able to compete and operate much further from its coast, acquiring a virtual size that equates it with other larger countries, in cyberspace.

Other Reforms

I would also like to refer for a moment on the reform of the justice sector, since it is an important link in the business chain. Indeed, several projects are underway, and we welcome the changes at the top/constitutional level, as well as the creation of the Commercial Court and the Admiralty Court.

At the same time, we take the view that justice would be much more efficient and better administered if we were able to operate more specialised courts. At the same time, we support the concept of the Tax Tribunal and call on the government to consider upgrading it to a specialized dispute resolution body, which will facilitate both taxpayers and the Tax Department, thus enhancing tax justice.

Ladies and gentlemen

Foreign Direct Investment

The reputation of each business destination is based on the quality of its investors, the framework of services by state and private sectors, the security it exudes through its institutional framework, the ease and speed of execution of business actions and the framework of transparency, stability and culture against corruption.

Therefore, our main concern, in addition to the above, should now be the careful and qualitative selection of investors and businesses that we attract and host in Cyprus, the simplification of procedures and the establishment of competitive and transparent operating frameworks. On the same wavelength is the implementation of the relevant European Regulations, such as the Bill on the screening of foreign direct investments on the basis of the European Union's "Foreign Direct Investment Screening Directive".

As one can see from recent international publications as well as from decisions of the European Parliament, our country has another hurdle to overcome. It is extremely important to put the emphasis where it matters until we are in manageable stages.

Economic Diplomacy

Even the extroversion of the country and the government, I would say, is of great importance in promoting Cyprus abroad, projecting our own narrative on the one hand and on the other, responding to various negative publicity, which may often be ill-intentioned.

With a view to substantially reviving the concept, we reiterate our proposal for the establishment of an advisory body composed of state and relevant private sector bodies to help the government achieve its goals, improve/reverse Cyprus' image in the international business arena and strengthen it as a prestigious regional business centre.

Cyprus is located in a strategic geographical position, between three continents, and this creates a great strategic advantage. Our responsibility is to use this opportunity to strengthen our economy.

Reputation

Dear friends,

Continuing from Economic Diplomacy, it is accepted that, in recent years, the reputation and image of Cyprus internationally has been significantly damaged. Despite all the efforts made by many state and private sector agencies, we need to do something more to achieve the restoration of the perception that exists for our country. First of all, the most important thing is to tidy up our own house and highlight this through relevant communication. It also requires consistent and systematic monitoring of the international media and projection of responses, a clear strategy in economic diplomacy and, of course, an excellent product to promote or an excellent story to tell. Perhaps, at this moment, this is the biggest wound that the State is called upon to manage, restoring Cyprus' credibility on the international stage, which will allow it to continue its actions as a regional center providing services with prestige and reliability. Ladies and gentlemen

CORRUPTION / TRANSPARENCY

Undoubtedly, one of the issues that has been in the headlines for a long time, without being able to ignore it, is that of fighting corruption. Apart from the social and political dimension, as long as Cyprus remains at low levels of evaluation, it is difficult to emerge as an international centre for the provision of prestigious and trusted services.

For us at ICPAC, the immediate implementation of good governance practices is essential, along with the appropriate and effective implementation of the provisions of the General Principles of Administrative Justice Law. The establishment of the Independent Authority against Corruption is a good start, but one that has a lot to do going forward. The principles of meritocracy and legality should be the main concern, while the implementation of e-government is also an important tool.

Economic Prospects

Dear friends,

ICPAC, despite the difficulties and problems, believes that our economy has the ability to do better than forecasts indicate in 2023. We see prospects in new sectors of the economy, such as energy, research, innovation, technology, green and blue growth, sustainability and others. To these sectors we should add shipping, private healthcare and education, which today contribute significantly to the development of the country.

The implementation of the Recovery and Resilience Programme, the green transition and our commitments to the European Union's Green Deal, as well as actions for sustainable growth should play an important role in the equation of the outlook. However, in order to achieve this, it is necessary to take those bold and groundbreaking decisions concerning reforms, institutional changes and modernization initiatives. We must be bold, not tolerant, of distortions if we want to build a better and sustainable tomorrow, regardless of any temporary political cost.

Icpac Actions

Mr President,

Last year was very peculiar and with unforeseen difficulties for ICPAC. The impact of the war in Ukraine on our profession and members has created a negative environment for our industry, bringing a cloud of uncertainty.

ICPAC, in cooperation with the government, managed these issues to the best of its ability. With seriousness and responsibility we limited the negative impact and now we are trying to avoid other adventures. At the same time, ICPAC participated in many meetings of Parliamentary Committees on legislative issues, contributed to the promotion of amendments to tax legislation, further promoted corporate governance, managed issues related to money laundering and the audit profession, exercised its supervisory role with due seriousness and impartiality, proceeded to new local and international collaborations with other economic operators, it expanded the training of its members, strengthened its services internally and generally developed a multidimensional action in all areas of interest to its members. At the same time, it successfully promoted the adoption of the International Standard on Review Inspections (ISRE 2400) to allow micro-enterprises to be audited through an alternative procedure, which falls under the principle of proportionality and aims to reduce the administrative burden on all stakeholders.

At the same time, ICPAC took the initiative to submit a proposal for the establishment of a national financial reporting standard for small and medium-sized enterprises, based on the corresponding standard of the International Federation of Accountants. In addition, ICPAC continued its internal organizational and operational strengthening, strengthened its supervisory role by implementing new Disciplinary and Administrative Regulations, while it demonstrated significant work in informing its members on compliance and sanctions issues against Russia, issuing numerous guidelines and relevant Regulation. Where possible, we also showed our social side by offering financial assistance to vulnerable groups in our country, as well as through the ICPAC Member Relief Fund. In conclusion, judging today what happened last year, amid the pandemic and international economic uncertainty, I believe that, under the circumstances, we managed to keep ICPAC's flag high. Our members should feel both satisfaction and pride in what has been achieved at a very difficult time indeed.

New Era

Dear friends,

The new era that is coming will be very different from what we have experienced in previous years. In this new era, Cyprus must have a strong economy, a functioning state, modern institutions and dynamism in its businesses and human resources. Without these conditions we will not be able to offer to our citizens a better standard of living and a better life.

ICPAC is ready to help the economy and Cyprus, with proposals, actions and initiatives. We are at the disposal of the State for the required steps forward.

The new era is here and as Cyprus we should be faithful to our appointment. And this is the message we are sending today from the podium of our AGM: All together for a better Cyprus...

Thank You

Dear friends,

Concluding my speech, I would like to inform you that today my term as President of ICPAC comes to an end, while remaining a member of the Governing Council for another year.

I wish the new President every success in the beautiful task he is undertaking. I would also like to express my thanks to all the members of the Governing Council for their close and excellent cooperation. I would also like to thank the General Manager and ICPAC's officers for the hard work they are doing for the good of our Institute and our members. I also extend additional thanks to the members of the Institute’s Committees who donate time and knowledge for the benefit of ICPAC and its members.

It would be remiss of me not to thank the government and the competent Ministries, the Parliament, PCAOB, other government departments and services, as well as institutional, professional, academic institutions and organizations, for the close and excellent cooperation we have over time. The biggest thank you, however, belongs to you, our members, who support ICPAC and are always by our side at all times.

As a final point, I would like to express the sincere condolences of ICPAC and our members to the families of two dear colleagues who we have sadly lost this year. I refer to Costakis Christofides and my very good friend Panicos Tsiailis, who also served as ICPAC's presidents, offering so much both to ICPAC and to the profession in general. Their memory is eternal.

Thank you very much.