Panayiotis Rougalas
The opposition is once again reopening the issue of additional taxation on banks in Cyprus, an issue which the previous Parliament had indeed opened but ultimately failed to pass. Inflation, which has begun to rise once again due to the recent war by the United States and Israel against Iran, has brought interest rate increases back into the spotlight, a move undertaken by the European Central Bank (ECB) in order to combat it. The increase in interest rates by 25 basis points places bank borrowers in the face of new increases in their loan repayments, but it also brings profits to the banks because of the excess liquidity they have deposited with central banks, which generates passive income. The ECB has also stated that the 25-basis-point increase we have seen will not be a "one-off," as its mission is to tame inflation, just as it did two years ago. Thus, it is only a matter of time before Parliament begins discussing a new tax on banks, with the aim of supporting vulnerable social groups and borrowers in need.
Banks strongly oppose this line of thinking, arguing that they already pay enormous amounts to the state through taxation, while at the same time paying a tax that does not exist in other countries. In other words, as they have repeatedly stated, this tax operates as a disadvantage and reduces their competitive advantages compared with other banking institutions within the European Union. As part of the annual general meeting of the Cyprus Banks Association held last week, the Association also published its annual report containing statistical data that sets out in detail the taxes and types of taxes paid from 2018 through to 2025.
€2.81 billion since 2018
According to data analysed by K, Cypriot banks contributed €427 million to public revenues in 2025, while their total contribution over the eight-year period climbed to €2.81 billion through taxes they paid. The banking sector's total tax contribution increased by 91% over seven years.
The banks argue that they already pay enormous amounts to the state through taxation, while at the same time paying a tax (special bank levy) that does not exist in other countries.
Analysing the figures provided by the Cyprus Banks Association, 2025 recorded the highest contribution, as mentioned above, at €427 million. The taxes paid by the banks reached €284.2 million, of which €99.1 million related to corporate income tax, €79.8 million to the special bank levy paid only by banks, €39.8 million to non-recoverable VAT paid by the banks themselves, €50.8 million to employer social insurance contributions, and €14.7 million to other taxes on activities and profits. At the same time, €142.8 million was collected on behalf of the state, of which €82 million related to employee taxes and contributions, €39.9 million to the defence levy and GESY contributions on deposits, and €21 million to VAT, stamp duties, and other taxes. The banks' total contribution represented 5.3% of the Republic of Cyprus's total tax revenues, which amounted to €8.07 billion.
