Transaction Tax Gives Cyprus Stock Exchange New Stability Fund

by Lorys Charambolous, Tax-news.com, Cyprus

06 April 2001

Cyprus Finance Minister, Takis Klerides, announced earlier this week the government's intention to create a stability fund to support the Cyprus Stock Exchange (CSE). The fund will be maintained from the revenue generated by the transaction tax imposed on CSE investor transactions which is automatically added as the transaction order is placed at 0.6 per cent of the transactional value for individuals and 1 per cent for companies. In the first quarter of this year alone the tax provided the government with an extra CY£3.7 million.

According to a report by the Xak online news service, the government has already formed a company, the Cyprus Stability Investment Fund Ltd, of which it will initially be the sole shareholder. It is intended that CSE transactions will raise a loan of CY£100 million for the fund.

Elsewhere in the Cyprus media, concerns have been raised over the fund. The Cyprus Financial Mirror highlighted the fact that the majority of the tax proceeds were included in last year's Budget and says it remains to be seen how the politicians will agree to the future management of the fund and what areas it intends to invest in.

Meanwhile the socialist KISOS party has revealed details of its tax incentive package costing around CY£75 million which includes changing the tax bands, tax discounts to people with low income and higher social insurance contributions to be paid by employers. Furthermore KISOS says it would like to scrap the CSE transaction tax as well as the capital gains tax. For capital gains up to CY£6,000 per year KISOS proposes a zero tax rate, a 10 per cent tax for gains up to CY£20,000 and a 20 per cent tax for gains above CY£20,000.

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