New bank tax could ease the pinch on families, but who’s behind it?

A year after narrowly losing a vote in parliament, AKEL is back with a new proposal to impose an emergency tax on banks for 2025 and 2026, calling it a “solidarity levy” aimed at helping everyday Cypriots cope with rising costs.

The party’s secretary-general, Stefanos Stefanou, says the levy is temporary and targeted. It is meant to make sure banks, which have been making unexpectedly high profits amid rising interest rates, share some of the burden caused by inflation and higher loan costs over the past three years, according to Kathimerini's Panayiotis Rougalas.

Last year, the proposal failed in a tie, 25 votes for and 25 against, with four MPs abstaining. AKEL is hoping that this time, the numbers could swing in their favor.

AKEL’s memo points out that while families and small businesses have struggled under increasing interest rates, banks have been raking in profits, largely due to wider interest rate margins rather than organic growth. The new tax would hit banks on the portion of profit that exceeds 40% of the increase in net interest income compared to 2022, with a proposed rate of 20%.

The party also cites examples from Latvia, Estonia, and Lithuania, where similar emergency taxes on unexpected bank profits between 2023 and 2025 helped state budgets without harming financial stability.

Unsurprisingly, banks are not happy. They argue they already pay a special 0.15% tax on deposits, over €500 million in the last decade, and warn that further taxes could hurt Cyprus’ investment climate and financial stability.

The bill also includes a strict rule: if a bank tries to pass the cost of the tax onto customers, it would face a fine of 150% of the amount passed on.

With inflation and loan pressures still high, AKEL is betting that public support for the measure could push it through this time around.