Stavrakis stated that Cyprus’s financial system was barely exposed to the toxic debt arising from the sub-prime crisis, limiting the challenges for Cyprus during 2009. Stavrakis however stressed that the nation’s financial sector was under close scrutiny and new transparency and accounting standards were being pursued.

Stavrakis predicted that 2009 would bring more challenges than 2008, but that Cyprus would outperform many of its European counterparts, citing GDP growth of 2%.

“The medium-term prospects are promising; the primary challenge will be to maintain and further improve the competitiveness of the economy. The absence of a national monetary and exchange rate policy, after euro adoption, underscores the need for the strengthening of the role of prudent fiscal policies and structural reforms,” he said.

The Cypriot Finance Minister has pledged to improve Cyprus as a favourable business climate by:

• the maintenance of low levels of taxation for enterprises and employees;
• the simplification of the regulatory framework and the reduction of the administrative burden for business;
• a continuous upgrading of the infrastructure in transport, energy and communications;
• the promotion of research and innovation; and
• the further development of human capital;

Stavrakis then addressed the Russian Business Association on the subject of Cyprus as an investment destination, citing factors in the country's favour such as: its strategic position of the island at the crossroads of Africa, Middle East and Europe; the fact it is a member state of the European Union; its modern and transparent legal, financial and accounting systems modeled on those of Britain; its favourable tax regime stemming from reform undertaken from mid 2002 which introduced a uniform corporate tax rate of 10%; and its wide network of agreements for double taxation avoidance with 40 countries including the Russian Federation.

“First of all, the tax reform that took place in 2002 is in compliance with the EU Code of Conduct for Business Taxation and the commitment to the Organization for Economic Co-Operation and Development (OECD) for the elimination of harmful tax practices. It is a simple and modern tax system, which applies comparatively low tax rates for corporations and physical persons. It is also friendly to non-residents and businesses, since, for example, it abolished withholding taxes on interest and dividends. Moreover, the government of the Republic of Cyprus intends to expand its current network of bilateral treaties for the avoidance of double taxation," he explained.

Stavrakis also spoke of progress in the Cypriot-Russian discussions surrounding Russia’s 'blacklist' of uncooperative territories, on which Cyprus is listed.

“There is currently in force an Agreement between Cyprus and Russia for the avoidance of double taxation with respect to taxes on income and on capital. Negotiations are in progress for the conclusion of a Protocol to amend the existing tax treaty. One of the issues under consideration is the adoption of the new OECD Model Tax Convention Article for the Exchange of Information, which includes the exchange of bank information. The adoption of the OECD Model Article would allow the exchange of bank information in a structured way, as per the relevant provisions of the Cyprus tax law enacted on July 10 2008, and in force as from July 25 2008. It is important to note that with the conclusion of the Protocol, Cyprus will maintain its status as the most favourable route for investments into Russia and Cyprus will be removed from the List of Countries with Preferential Tax Regimes in Russia."

Russia is an important economic partner for Cyprus; around EUR370m was invested by Cypriots in Russia during 6 months of 2008, and around EUR54m was invested by Russians in Cyprus during the same period.