Cypriot Finance Minister, Kikis Kazamias has urged the adoption of proposals to rein in the country's deficit to avoid a European Union bailout, including an increase to the value-added tax rate and an annual registration fee for companies.
The package of measures, yet to be approved by parliament, would increase the VAT rate to 17% from 15% currently, hike withholding tax on savings interest derived by Cypriot residents from 10% to 15%, and add an additional top rate of personal income tax of 35% on income above EUR60,000 (USD41,750).
In addition, companies formed in Cyprus will be required to pay a EUR350 annual fee to the government.
Cuts to government spending, Kazamias has said, will include a reduction in the number of public sector workers through natural attrition and a hiring freeze. Public sector workers would pay an extra 3% on their wages but would retain their generous pensions; any new recruits to the public services would have 10% lower salaries.
The measures, whose timing is not yet clear, are aimed at achieving an additional 1% reduction in the fiscal deficit expected in 2011, to 5.5% of gross domestic product (GDP), and a European Union-assigned deficit target of below 2.5% of GDP by the end of 2012. However, it is far from certain that the fractious Cypriot parliament will accept these government proposals as they stand.
The package of measures, yet to be approved by parliament, would increase the VAT rate to 17% from 15% currently, hike withholding tax on savings interest derived by Cypriot residents from 10% to 15%, and add an additional top rate of personal income tax of 35% on income above EUR60,000 (USD41,750).
In addition, companies formed in Cyprus will be required to pay a EUR350 annual fee to the government.
Cuts to government spending, Kazamias has said, will include a reduction in the number of public sector workers through natural attrition and a hiring freeze. Public sector workers would pay an extra 3% on their wages but would retain their generous pensions; any new recruits to the public services would have 10% lower salaries.
The measures, whose timing is not yet clear, are aimed at achieving an additional 1% reduction in the fiscal deficit expected in 2011, to 5.5% of gross domestic product (GDP), and a European Union-assigned deficit target of below 2.5% of GDP by the end of 2012. However, it is far from certain that the fractious Cypriot parliament will accept these government proposals as they stand.
