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Interest income tax to be reduced

15/10/2015 09:10
Minister of Finance Harris Georgiades said Special Defence Tax on interest income which is currently at 30% may be reduced to the EU average in the future but only if the state of the public finances allow it.

He made clear that the tax will not return to the pre-bailout levels of 10%. Interest income tax, called Special Contribution for Defence was raised to 30% in March 2013 as part of the conditions for the island`s €10 billion bailout.

“I don`t see that interest rate income would return where it was before. I don`t think it will go back to 10%, but perhaps at some stage we could reduce to the EU average level of 20%, maybe,” he said, responding to questions, during an event titled “Cyprus economy: current state and prospects.”

Speaking to the event, Georgiades said the Finance Ministry believes that the Cypriot GDP growth rate in 2015 will be close to 1.5% compared to Cyprus lenders` forecast of 0.5%.

He noted that the Cypriot case showed that fiscal consolidation was achieved without undermining economic growth.

“On the contrary the restoration of confidence and the sense of stability was crucial and conducive and allowed productive sectors of the economy such as tourism, the business services sector and maritime to operate showing resilience and prospects,” he noted.

Following three and a half years of recession, the Cypriot economy recorded growth amounting to 0.4% and 1.2% in the first quarters of 2015.

“The exit from recession and the return to growth rates marks the achievement of the most significant target set for the current period,” he said, adding that the return of Cyprus to the international capital markets “would allow use to programme Cyprus` exit from the economic adjustment programme.”

But he noted that “there is no room for complacency or to return to the practises that derailed the economy in the first place.”