Cyprus Parliament Adopts Amended Austerity Package

by Lorys Charalambous, Tax-News.com, Cyprus

01 September 2011

Cypriot lawmakers have approved the first of two sets of austerity measures with significant alterations, as part of the government's efforts to agree credible plan to reduce the country's deficit to avoid an EU-funded bailout and calm bond markets.

The ruling government, which holds just 19 of the 56 seats of the House of Representatives, bowed to a number of demands from opposition parties to eventually pass its first raft of measures, which were rejected earlier.

Among measures that were previously planned, the value-added tax rate increase from 15% to 17% was abandoned in order to get the bill through.

As previously proposed, parliament agreed upon the creation of a new income band with a rate of 35% on income above EUR60,000 (USD87,000), a hike to the withholding tax on savings interest derived by Cypriot residents from 10% to 15%, increases to the tax on real estate, and a EUR350 annual fee on companies.

Other measures in the package included a public sector hiring freeze, cuts in public sector salaries, and a new contribution from public sector workers to state pensions.

A second package of measures, expected to include more cuts to the public sector and a redoubled crackdown on tax evasion, is to be presented to parliament in mid-September, Kikis Kazamias, the country's finance minister has said.

Recommended