Cypriot Government Requests £60m From Utility Firms

by Lorys Charalambous, Tax-News.com, Cyprus

29 May 2003

According to a report in the Cyprus Mail this week, the Cypriot government has asked the partially state-owned Cypriot Telecommunications Authority (CyTA) and the Electricity Authority of Cyprus (EAC) for a contribution of £65 million from their combined surpluses.

This is the second consecutive year that the government has asked the two companies for cash. Last year, it was reported that the then Socialist Democratic administration received £40 million from CyTA and a further £20 million from EAC.

At present it appears unclear what the Cypriot authorities intend to do with the money, but the most likely option is that it will be used to help plug the government's widening budget deficit, which at current levels breaches the EU's Growth and Stability Pact ceiling of 3% of GDP. Estimates for 2003 put the Cypriot budget deficit at 3.9%.

Former Finance Minister Takis Klerides told the Cyprus Mail that the government was entitled to take surpluses from the two utilities, as it was in effect the biggest shareholder in the companies.

“We were getting the surpluses not needed by these organisations for their investments or other plans. After all, the government is a shareholder so it is allowed the benefit out of that,” he explained.

The former Finance Minister also appeared less cynical with regard to the current government's motives than others, suggesting that the money could be used to lower taxes or invest in other infrastructure projects, rather than going to reduce the budget deficit. “There are other ways to do that such as raising taxes or limiting government expenditure,” he told the CM.

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