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Bailout Crisis As Tax Levy Is Rejected

Cyprus banks are to remain closed until Tuesday following the rejection by Parliament this week of proposed measures with regard to the international bailout proposition. Taxand Cyprus discusses the recent events which are causing uproar in the Euro Zone.

The Cyprus political parties declared their opposition to the international bailout and later confirmed this stance with a vote which took place earlier this week. The political party in which the President of Cyprus belongs abstained from the vote.

The President of Cyprus is holding meetings with party leaders and representatives of the Central Bank of Cyprus in order to discuss the new developments and prepare a 'Plan B' to be presented to the European Central Bank.

The proposed international bailout propostion included the imposition of a one time tax levy on bank deposits. The Government said party leaders had agreed to create a "solidarity fund" that would bundle state assets as the basis for an emergency bond issue, but Parliament speaker Yiannakis Omirou insisted a revised levy on larger bank deposits, many of them held by Russians, was not on the table.

Meanwhile the Finance Minister is currently in Moscow at meetings in order to discuss the possibility of investments through Russia in order to reduce its debt burden. An extension of an existing EUR 2.5 billion Russion loan will also be discussed.

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Eylem Philippou
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Taxand's Take

The European Central Bank and the Government of Cyprus are yet to come to a firm agreement, however already doubts about the fate of Cyprus has shaken confidence in the single currency Euro Zone. The proposed levy on deposits would have taken nearly 10% from accounts over EUR 100,000. Cypriots were enraged at the proposal to tax accounts with less than EUR 100,000 which are meant to be protected by state guarantees across the European Union.

Taxand's Take Author

Chris Damianou