Despite projecting a budget surplus for the third consecutive year in 2009, Cyprus's Finance Minister Charilaos Stavrakis has decided against providing tax relief in the government's latest budget.
Announcing a 'steady-as-she-goes' budget this week, which was approved by the cabinet on Wednesday, Stavrakis said that the government remains committed to its goal of maintaining a fiscal surplus, expected to reach 0.7% of GDP in 2009.
Compared to some of its partners in the eurozone, the Cypriot economy remains relatively robust thanks in large part to the strength of the business and financial services sectors. However, Stavrakis cautioned against any rash budgetary moves mindful of the fact that the global economic situation is more sensitive. Fiscal discipline, therefore, seems to be uppermost in the government's thinking, at least in the short-term.
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 revenues of EUR6.37bn (USD5.36bn), a 4.7% increase since the 2008 budget, but Stavrakis warned that a sharp fall in domestic consumption will lead to falling value-added tax revenues.
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