Bank profits in crosshairs in Cyprus
The future of a special tax on bank deposits paid to the state in Cyprus may be heading for a shift, though a final decision is not guaranteed.
The proposed change involves redirecting the 0.15% tax, which banks have paid into the Republic’s Fixed Fund since 2011, toward social policy and addressing punctuality issues. The matter now rests with Parliament, where a majority will need to approve the shift, followed by government approval if the measure passes.
However, leftist opposition party AKEL’s push to increase this tax due to perceived banks’ “over-profiting” could complicate the plan. If AKEL’s proposal raises the rate from 0.15% to between 0.20% and 0.30%, banks’ annual contributions could jump from 69.5 million euros in 2023 to nearly €100 million.
Such an increase might create challenges for banks to sustain these payments, particularly as their profitability, bolstered by rising interest rates, is expected to diminish with future rate cuts from the European Central Bank. Since 2017, banks have paid a total of €400 million in special taxes on deposits. The shift of the 0.15% tax to fund social programs is seen as a practical solution that could garner widespread support.
