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Cyprus: Small Investors To Be Excluded From Tax

Published: March 19, 2013; 10:43 · (Vindobona)

After protests among Cyprus‘ citizens arised and harsh criticism was expressed, the government now intends to exclude small savers from the compulsary tax and grant them a relief.

Cyprus: Small Investors To Be Excluded From Tax / Picture: © Vindobona.org

The initial proposal by the Eurogroup was rejected by the Cyprian government. Instead of charging all creditors with assets of up to € 100,000 on their bank accounts with a tax of 6.75 %, depositors with savings below € 20,000 will be given an allowance. Creditors with assets from € 20,000 to € 100,000 will still be charged with a levy of 6.75 % and assets above € 100,000 charged with 9.9 %.

However, an official statement has not been given so far. "It looks like it won't pass," Cypriot government spokesman Christos Stylianides told public radio about the first draft. The vote, which should have been carried out on Sunday, had been postponed twice. Due to this measure a total of € 300m would still be missing in order to collect the required € 5.8bn, apart from € 10bn EU aid money. President Nikos Anastasiades explained he had to accept the compulsary tax in order to receive international aid money. The Eurogroup emphasized on the demand to also warrant for savings up to € 100,000 and therefore pushes the Cyprian government to increase taxes on big investors.

According to a representative of the Greek finance ministry, Cyprus avoided increasing the compulsary tax for big investors in fear of a massive cash drain since two thirds of assets originate from foreign countries. As stated by the ministry, the missing money should be provided from “other sources”. It is still unclear what the mentioned sources should be.

In the meantime, the frustration of the Cyprian population has increased and protests continue. "If you're a small depositor in Cyprus you'll tell yourself that it would have been better to keep your money under the carpet than in a bank," a French bank administrator disclosed. "And if you're a Greek, a Spaniard or an Italian, well, you'll tell yourself that you might be next," he added.

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