Amidst the rising cost of living and high borrowing interest rates that have plagued households in recent years, in 2022, one in four workers in Cyprus had gross incomes of €19,500.
Specifically, beyond the 76,000 employees and self-employed individuals, they had annual earnings up to €19,500, the average of which equated to about €1,500 per month.
These amounts, due to intense inflationary pressures, were insufficient to cover consumers’ basic needs.
In 2022, inflation had significantly eroded the incomes of Cypriots and beyond, reaching 8.4%, causing severe difficulties for households.
At the same time, another 71,195 taxpayers had annual earnings up to €28,000.
Thus, according to data from the Tax Department, 49%, or 147,508 employees and self-employed individuals, essentially fell into the middle-income bracket.
Meanwhile, last year due to the zeroing of memorandum cuts in salaries, the increase in allowances, and the increase in the annual tax-free allowance (CoLA) to 66.7%, there was a slight increase in earnings, mainly for public sector workers.
However, the cost of living remains high as many products in the supply chain remain elevated despite a decrease in inflation. It is worth noting that inflation dropped to 1.2% in March from 1.8% in February and 5.8% in March 2023.
Middle-income at 49%
Data from the Tax Department reveal how salaries moved in 2021 and 2022, based on tax declarations submitted.
Specifically, in 2022, there were 299,421 taxpayers, both employees and self-employed, based on gross income.
From the analysis, it appears that 25% of taxpayers had incomes up to €19,500, which are tax-free following a decree by the Tax Department.
It’s worth noting that according to legislation passed a few years ago, the submission of tax returns is mandatory for all taxpayers. However, over the past two years, a decree has been issued exempting this specific category of taxpayers.
Meanwhile, in the second tax bracket with annual earnings from €19,500 to €28,000, there were 71,195 taxpayers, accounting for 24%.
Moreover, these specific incomes were taxed at 20%. Furthermore, another 48,368 workers had earnings from €28,001 to €36,300, constituting 16% of the total taxpayers and taxed at 25%.
Additionally, another 100,000 employees and self-employed had annual salaries exceeding €36,300.
Specifically, 66,843 high-earning workers (22%) had gross incomes from €36,301 to €60,000, on which they paid a 30% income tax.
Finally, at the top income levels with salaries exceeding €60,000, there were 36,702 employees and self-employed individuals, accounting for 12% of the total, who paid income tax at a rate of 35%.
Increase in high earners
However, from 2017, when the Tax Department had published similar data, it is clear that in 2022, the number of tax-exempt employees decreased by 15%.
Additionally, there was a 2.4% increase in employees who saw a rise in their earnings, moving into the second tax bracket.
Moreover, there was a 2.2% increase in the earnings of taxpayers earning from €28,001 to €36,300.
Remarkably, beyond the 20,000 employees who had increases and annual incomes up to €60,000, changing tax brackets, there has been an almost twofold increase in employees whose incomes exceeded €60,000 annually within five years.
In total, 36,702 employees were at the top income levels in 2022, up from 20,936 in 2017. It is worth remembering that the government is expected to proceed with tax reforms, considering an increase in the tax-free allowance to €24,000.
