Diagnostic and Proposal for the Reform of the Personal Income Tax System in the TRNC

At the present time the tax mix in the TRNC consists of an income tax at both the individual and corporate levels. The corporation income tax is partially integrated with the personal income tax system. In addition, at both the individual and the firm level there are social security contributions that are quite substantial. The focus of this paper is on the personal tax system, which in year 2000 was responsible for raising 32 percent of total taxes or 6.7 percent of GNP. There is a need for North Cyprus to follow the lead of tax reforms in countries all over the world and reduce the "theoretical" progressively of the personal income tax structure. In addition the government needs to help the tax administration build up the level of tax compliance in the country.