Vote on Deposit Tax Delayed in Cyprus

March 18, 2013 Taxation in Cyprus

Deposit SafeNICOSSIA – The financial future of Cyprus hangs in the balance as politicians prepare to vote on a controversial new tax on bank deposits held in the country.

On March 18th the parliament of Cyprus is scheduled to vote on the new proposal to enact a once-off levy on bank deposits, which, if approved, will impose a 6.75 percent tax on all deposits of less than EUR 100 000 held in a local financial institution, and also a 9.9 percent tax on all deposits larger than EUR 100 000.

The Parliament of Cyprus was originally scheduled to vote on the proposed measure on March 17th, but the vote was delayed without any officially reason being given.

The tax, which is forecast to raise an additional EUR 5.8 billion in extra tax revenues, was proposed by the European Commission, International monetary Fund, and the European Central Bank, as part of the country’s EUR 10 billion bailout package.

Originally Cyprus had requested a bailout package of EUR 17 billion, but is now being offered a reduced amount of EUR 10 billion, with the difference to be made up by the bank levy under discussion.

So far the proposal to enact the bank levy has initially received mixed responses, with at least 20 members of the country’s 65-seat parliament stating that they will not support the measure.

However, tax experts in Cyprus and abroad have already come forward to say that the proposed levy is the only viable choice left to the government of Cyprus to raise the necessary levels of revenues in a very limited amount of time, and rejecting the proposed levy will lead the country to an inevitable and damaging downward spiral.

According to analysts, postponing the vote provided local and international clients of Cypriot banks and financial institutions to withdraw their funds and capitals and transfer them to other jurisdictions.

Photo by Cennydd