State revenue from personal income tax fell by 25.4 million euros in the first seven months of 2026, as tax deductions introduced under the tax reform at the start of the year took effect. Total tax revenue still rose.
Personal income tax brought in 694.5 million euros from January to the end of July, compared with 719.9 million euros in the same period of 2025, a fall of 3.5 per cent. The shortfall has widened as the year has gone on: by the end of May, receipts were 9.9 million euros lower than a year earlier, at 497.8 million euros.
Total tax revenue reached 4.47 billion euros in the first seven months, up from 4.32 billion euros last year. The finance ministry said revenue had risen despite the losses caused by the reform’s benefits to individuals and businesses.
Reform and its cost
The reform, as amended by parliament, increased the incomes of 200,000 taxpayers by raising the tax-free threshold to 22,000 euros, changing the tax bands and introducing deductions based on family make-up and income.
The deductions depend on the number of dependent children and students, spending on rent and on interest on a performing mortgage for a main residence, and on energy upgrades to a main residence and the purchase of an electric vehicle.
The University of Cyprus Economics Research Centre initially estimated in a study that the deductions would cost the state 151 million euros a year. A separate estimate put the revenue lost from the reform as a whole, which also affected other taxes, at around 280 million euros.
The Fiscal Council, however, said in its report that the reform’s impact would be smaller than first calculated. The difference was put down to pay rises for public sector workers from the cost-of-living allowance (COLA) and salary increments, which boosted consumption.
Taxes that rose
Five of the 12 sources of tax revenue brought in more than last year. VAT was the biggest earner at 1.82 billion euros, followed by corporate income tax at 934.7 million euros, customs VAT at 467.8 million euros, the special defence contribution at 340.6 million euros and the special tax on credit institutions at 45.1 million euros.
Taxes that fell
Besides personal income tax, six others brought in less. Capital gains tax fell by 3.8 per cent to 130.1 million euros, and casino tax by 4.6 per cent to 16.7 million euros. Revenue from miscellaneous direct taxes dropped by 22.5 per cent to 6.9 million euros, and immovable property tax by 1.9 per cent to 5.1 million euros.
Stamp duty fell by 76.6 per cent following its abolition under the reform, to 6.2 million euros from 26.5 million euros. The special contribution from employees fell by 12.5 per cent to 700,000 euros.
