New Taxes Proposed on Bank Deposits / Tobacco

A new package of measures aimed at lowering Cyprus' government deficit and boosting the economy proposes to tax bank deposits for two years and raise taxes on tobacco, foodstuffs and pharmaceuticals.

The 2011 budget has already been criticised by opposition parties, which have lambasted the DIKO/AKEL measures citing a lack of transparency and saying that the plan will hit low-income groups.

The 2011 budget proposals are:

• Raise VAT taxes by 5 percent on foodstuffs and pharmaceuticals. 

• Raise taxes on cigarettes by 30 percent. 

• Cut the government payroll by 35 million euros. 

• Impose a 0.05 percent tax on bank deposits over 100,000 euros for two years. 

• Reduce the deficit to 4 percent from its current 6 percent and get back in line with the EU's limit of 3 percent by 2012.

In July, Parliament rejected new taxes proposed by the Ministry of Finance, including an increase in corporate tax from 10 percent to 11 percent and a re-evaluation of property tax from 1980 value levels to current value levels. The AKEL/DIKO government coalition will now try to get the new budget ratified in Parliament which votes on the measures next Thursday.