Nicosia, Cyprus. The Employers and Industrialists Federation (Oev) warned against renewed efforts to impose additional extraordinary taxes on bank profits, saying such measures would harm the economy and undermine investor confidence.
Concerns over renewed taxation proposals
Oev said it was deeply concerned by the reintroduction of discussions on further taxation beyond the special levy on banks that has been in place since 2011, and argued that bank profits are being inaccurately described as unexpected.
Role of investors during the financial crisis
The federation said that “the only unexpected development during the collapse of Cyprus’ financial system and the state’s fiscal bankruptcy in the 2011 to 2014 crisis was the confidence shown by international investors, who took on significant risk and played a decisive role in rescuing the banking sector and, by extension, the wider Cypriot economy”.
Oev said these investors supported the sector “with billions” and for years had “no return, no dividend and no benefit”, while demonstrating confidence in the stability of the legal and tax framework.
Bank restructuring and return to profitability
Oev said that through cost containment, extensive use of technological applications, and a reduction of staff by more than 50 per cent, the sector achieved profitable results for the first time after a decade.
It said it was inconceivable to penalise a sector that restored order through prudent policy and returned to profitability.
Investor confidence and legal concerns
The federation said additional extraordinary taxation would be dangerous, arguing that no serious investor would trust Cyprus in the future if such measures were imposed, and warned that taxation could later be expanded to other sectors or economic activities.
Oev also said the interventions under discussion may be unconstitutional and directly contrary to recommendations of the International Monetary Fund (IMF) and the European Stability Mechanism (ESM).
Possible impact on credit ratings
The federation warned that such measures could negatively affect the credit rating not only of the banking sector but of the economy as a whole.
How do you think additional extraordinary taxation on banks would affect investor confidence in Cyprus?
