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Tax hikes to cut budget deficit

The Cyprus Finance Ministry has proposed taxes on banks, companies, properties and basic consumer goods to plug a €150 million hole and keep the budget deficit for 2011 within the limits set by the European Union.

CYPRUS Finance Minister, Charilaos Stavrakis has put forward a series of measures designed to bring the Island’s 2011 budget deficit within the European Union limit of 4.5%. The budget deficit currently stands at 5.4% and the government is looking for a further €150 million to plug the gap.

Measures under discussion include:

  • A new tax calculation system for large landowners.
  • An increase in the Corporation Tax paid by Cypriot companies.
  • Some form of taxation on the banks.
  • Tax hikes on cigarettes and alcohol.
  • Imposition of 5% VAT on foodstuffs and pharmaceuticals.
  • Measures to restrain the state payroll.
  • Review of the public and quasi-public sector pension and bonus systems.

Pushing through these measures with government coalition partners will be difficult.

According to press reports, DIKO spokesman Fotis Fotiou has made clear that his party will not approve what it rejected three months ago (the increase in Corporation Tax and the taxation of properties).

Just a few days ago, the civil servants union PASYDY boycotted a meeting between the Finance Minister and the unions. Its head, Glafcos Hadjipetrou, refused to attend the meeting accusing Mr Stavrakis of showing “contempt” for the powerful union.

Whatever the outcome of the negotiations, you can be sure that the cost of living in Cyprus is set to rise. And those who have bought property from ‘large landholders’ and who have yet to receive their Title Deeds could well see their costs rise as developers try to minimise the impact of the new taxes.

Readers' comments

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  • Jim says:

    I would think introducing taxes on foodstuffs would not be popular with Cypriots. It would hit the poorest the most & the government may find it difficult to get re-elected as the ones who introduced this tax. Not a smart move.

  • pamela says:

    It seems to me that the the developers i.e. large landholders are running this country’s image into the ground, you cannot get any were with them. They take your monies in one hand after you’ve signed your contract, then totally ignore it and you have to keep paying for something or other.

    Think about Troy

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