The Cyprus Inland Revenue Department has announced that total revenue during the period January - September 2008 advanced by 4.1% year-on-year to EUR1.5bn.
The improvement is primarily attributed to higher revenue from the Special Contribution for Defence, up by 22.6% year-on-year to EUR292m, most of which is from a 10% tax imposed on interest income earned on bank deposits. Revenue from corporation tax advanced by 17.2% year-on-year to EUR514.9m, while revenue from capital gains tax declined by 22% year-on-year to EUR265.9m, which has been attributed to a decline in the property market.
Despite Cyprus’s increased revenue this year Finance Minister Charilaos Stavrakis revealed that he expects a reduced budget surplus in 2009 from the earlier projection of 0.7% of gross domestic product to 0.3% of GDP.
Stavrakis also announced to parliament that Cyprus has cut its economic growth forecast next year to 3.0% from an earlier prediction of 3.7%.
He told parliament that: "we are in a fluid environment and the final rate of growth in 2009 will depend to a great extent on the duration and depth of the world recession, and markets which have an impact on the Cypriot economy, like Britain and Russia."
Cyprus, which joined the euro zone on January 1, 2008, is heavily reliant on tourism, especially on visitors from Britain and Russia, with the sector a key currency earner representing about 13% of GDP.
Stavrakis said the government was considering its options on sources of revenue, but said there would be no new taxes next year. He also said there would be no change to the budget, drafted last month. “While the government sees no need to raise taxes, the revenue base will be strengthened through efforts to bolster the government's capacity to collect taxes,” Stavrakis announced.
The 2009 budget assumes a 4.7% increase of revenue on the 2008 figure, but Stavrakis warned that a sharp fall in domestic consumption will lead to falling value-added tax revenues.
"We have some other proposals in the drawer which we do not want to reveal at this moment which could help the finances of the government, and they are not tax (measures)," Stavrakis said.
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