Banks contribute over €854M in taxes amid controversy over proposed levy

In the last seven years (2017-2023), Cypriot banks have collectively paid more than €854 million in income tax, special taxes, and VAT, according to a report by Panayiotis Rouglas in last Sunday's Kathimerini.

Additionally, over this period, they have contributed in excess of €395 million through a special tax on deposits. These figures were disclosed during a session of the Finance Committee discussing a legislative proposal by AKEL aimed at establishing a Solidarity and Borrowers' Support Fund, to be funded partly by levying windfall profits from banks.

The Association of Banks presented data showing the significant contributions banks have made to state revenues, suggesting that funds from the special tax could potentially be earmarked to support vulnerable households under targeted social policies.

Since its introduction in 2011, the special tax on deposits has remained in effect annually, irrespective of banks' financial performances or profitability, unlike in many other Eurozone countries. Despite facing financial challenges, including losses and the need for additional provisions following the events of 2013, banks continued to fulfill their tax obligations, as highlighted in the committee discussion.

The proposed law by AKEL seeks to address economic pressures stemming from inflation and rising interest rates by establishing a fund supported by a one-time levy on banks' windfall profits. Proponents argue that such measures promote fairer economic distribution without jeopardizing fiscal stability or financial system integrity.

However, opposition to the law has come from the Ministry of Finance, the Central Bank, and the banking sector, citing concerns about the potential impacts on financial stability and the overall economy. Similar extraordinary tax measures have been implemented in five other EU member states, but their applicability and efficacy in Cyprus remain contentious amidst ongoing deliberations.