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Cyprus property tax receipts plummet

Figures released by the Cyprus Inland Revenue Department reveal that tax receipts resulting from the sale and acquisition of property during the first eight months of 2009 have plummeted by more than €200 million compared to he same period in 2008.

THE DRAMATIC fall in state revenues must be causing major problems for the Cyprus Finance Ministry. According to Stockwatch, the fiscal situation is so dramatic that if revenues continue to decline, the only way to keep deficit below supervision level is to suspend development expenditure for 2009 and delay payments and transfers.

During August, the state received €78 million; 27% less than August last year, which corresponds to 0.5% of the island’s Gross Domestic Product.

The largest fall in revenue has resulted from the collapse of the property market. Tax collections resulting from the sale and acquisition of real estate plunged €200 million in the first eight months of the year.

Cyprus Inland Revenue Department collections January - August 2009/2008

Cyprus Inland Revenue Department collections January - August 2009/2008

In total, the Inland Revenue Department collected €189 million less from direct taxes in the first eight months of the year. Together with the €169 million that it lost from indirect taxes, the total decrease stood at €356 million, which corresponds to 2.1% of GDP.

According to official figures, the budget deficit in the first half reached 2.4% of GDP. Since then, Cyprus has lost €160 million more in revenues from direct and indirect taxes.

According to Stockwatch, if those trends continue the state might lose more revenues of €300 million or 2% of GDP in the last four months of the year. To keep deficit below 3%, the government must cut its expenditure by millions of Euros in the next few months or even delay the payments and transfers. This would entail suspending the development budget. It is not accidental that in the first seven months of the year the government executed only a small part of its development budget of €1.3 billion, despite its commitment to accelerate development projects.

(Last week the Finance Minister, Charilaos Stavrakis, spent a night in the Nicosia General Hospital’s cardiology unit with chest pains. Although his doctor said the minister was in good health and there was nothing to worry about, minister blamed the scare on “too much stress”.)

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