31/12/2013 15:28
Crisis-hit Cyprus is preparing to say goodbye to a tough 2013 but is set to face an even harsher new year as fiscal provisions in its adjustment programme feature further pay cuts and tax hikes.
New measures to come in effect in 2014 aim at achieving a deficit of the general government primary balance of €483 million or 3.1% of GDP in the coming year, complying with the Excessive Deficit Programme recommendation of a headline deficit of no more than 8.4%.
Under the Revised Memorandum of Understanding of December 2013, Cyprus must fully implement ten permanent measures for 2014, amounting to at least €270 million.
In particular, expenditure measures include:
- A reduction in total outlays for social transfers by at least €28.5 million to be achieved through streamlining and better targeting of child benefits and educational grants, and abolition of social cohesion benefits provided by the welfare services,
- A further reduction in emoluments of public and broader public sector employees and pensioners by a flat rate reduction of 3% on all wages,
- An introduction of a fee on monthly transportation cards for the use of public transportation services by students and pensioners,
- An introduction as of the budget year 2014 of structural reform measures in the educational system, notably, a reduction of the number of teachers seconded to the Ministry of Education and Culture, the removal of 1:1.5 teaching time ratio from evening schools of general and technical and vocational education, the elimination of teaching time concession to teachers for being placed in two or more educational districts, the elimination of mentoring components for pre-service and in-service training for newly appointed teachers and the reduction of the cost of afternoon and evening programmes.
As for the revenue measures those include:
- An extension of the application of the temporary contribution on gross earnings and pensions of public and private sector employees up to 31 December 2016 as follows: €0 – €1,500 0%; €1,501 – €2,500 2.5%; €2,501 – €3,500 3.0%; and over €3,501 3.5%,
- An increase of the standard VAT rate from 18% in 2013 to 19% in 2014,
- An increase of the reduced VAT rate from 8% to 9%,
- An increase of the tax rate on fuel of €0.05,
- An increase of social security contributions, as of 1.1.2014; Employees will contribute an extra 1%, employers another 1%, while self-employed persons will contribute 2% and public servants 0.5%,
- A reform of the tax system for motor vehicles with effect from budget year 2014, based on environmentally-friendly principles, with a view to raising additional revenues in the medium-term, through the annual road tax, the registration fee and excise duties, including motor fuel duties.
The Cypriot economy has been hampered by recession since the third quarter of 2011. Excluded from international markets since May 2011, Cyprus requested and received a €10 billion financial assistance package from the Troika (European Commission, European Central Bank and International Monetary Fund). The package featured a sizeable reduction of the island`s banking sector, as well as bail-in of uninsured deposits.
New measures to come in effect in 2014 aim at achieving a deficit of the general government primary balance of €483 million or 3.1% of GDP in the coming year, complying with the Excessive Deficit Programme recommendation of a headline deficit of no more than 8.4%.
Under the Revised Memorandum of Understanding of December 2013, Cyprus must fully implement ten permanent measures for 2014, amounting to at least €270 million.
In particular, expenditure measures include:
- A reduction in total outlays for social transfers by at least €28.5 million to be achieved through streamlining and better targeting of child benefits and educational grants, and abolition of social cohesion benefits provided by the welfare services,
- A further reduction in emoluments of public and broader public sector employees and pensioners by a flat rate reduction of 3% on all wages,
- An introduction of a fee on monthly transportation cards for the use of public transportation services by students and pensioners,
- An introduction as of the budget year 2014 of structural reform measures in the educational system, notably, a reduction of the number of teachers seconded to the Ministry of Education and Culture, the removal of 1:1.5 teaching time ratio from evening schools of general and technical and vocational education, the elimination of teaching time concession to teachers for being placed in two or more educational districts, the elimination of mentoring components for pre-service and in-service training for newly appointed teachers and the reduction of the cost of afternoon and evening programmes.
As for the revenue measures those include:
- An extension of the application of the temporary contribution on gross earnings and pensions of public and private sector employees up to 31 December 2016 as follows: €0 – €1,500 0%; €1,501 – €2,500 2.5%; €2,501 – €3,500 3.0%; and over €3,501 3.5%,
- An increase of the standard VAT rate from 18% in 2013 to 19% in 2014,
- An increase of the reduced VAT rate from 8% to 9%,
- An increase of the tax rate on fuel of €0.05,
- An increase of social security contributions, as of 1.1.2014; Employees will contribute an extra 1%, employers another 1%, while self-employed persons will contribute 2% and public servants 0.5%,
- A reform of the tax system for motor vehicles with effect from budget year 2014, based on environmentally-friendly principles, with a view to raising additional revenues in the medium-term, through the annual road tax, the registration fee and excise duties, including motor fuel duties.
The Cypriot economy has been hampered by recession since the third quarter of 2011. Excluded from international markets since May 2011, Cyprus requested and received a €10 billion financial assistance package from the Troika (European Commission, European Central Bank and International Monetary Fund). The package featured a sizeable reduction of the island`s banking sector, as well as bail-in of uninsured deposits.
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