Finance Minister warns House it must back tax package

By Martin Hellicar

FAILURE to cut the public debt and deficit could jeopardise Cyprus’ EU accession course, Finance Minister Christodoulos Christodoulou warned during his 1999 budget speech to the House plenum yesterday evening, hinting that deputies would be ill-advised again to reject his biting tax package.

“I consider it my duty to point out that continuing high public deficits will adversely effect not only the course of the economy but our accession course too,” Christodoulou told the plenum at the end of his half-hour speech.

“If appropriate measures are not taken to reinforce public income, these indicators will continue to diverge from the desired directions,” Christodoulou warned.

The minister is soon to make a second attempt to get a tax hike package approved by the House, after having his last proposal thrown out in May.

Christodoulou said the economy as a whole was “basically healthy” and prospects for 1999 “encouraging” but the same could not be said for the public deficit or the public debt.

“During 1999, the public deficit is predicted to reach 5.8 per cent of GDP and the public debt to exceed 60 per cent of GDP, diverging for the first time from the relevant Maastricht criteria.”

Under the Maastricht Treaty, the ceiling for the public deficit is three per cent, while that for the public debt is 60 per cent.

The tax package rejected by the House in May would have brought the treasury nearly £150 million annually. That package included a four percentage point increase in VAT to 12 per cent.

Christodoulou’s new proposal is expected to follow similar lines.

The good news, the minister told his audience of deputies and six fellow ministers, was that growth was expected to reach four per cent in 1999. Unemployment was set to drop to three per cent, inflation to hover around 2.5 per cent and the balance of payments was to improve, he added.

The 1999 budget provides for a deficit of £580.8 million, five per cent more than in 1998. Expenditure is set at £1.68 billion and revenues are projected at £1.1 billion.

The Cyprus Mail is the only English-language daily newspaper published in Cyprus. It was established in 1945 and today, with its popular and widely-read website, the Cyprus Mail is among the most trusted news sites in Cyprus. The newspaper is not affiliated with any political parties and has always striven to maintain its independence. Over the past 70-plus years, the Cyprus Mail, with a small dedicated team, has covered momentous events in Cyprus’ modern history, chronicling the last gasps of British colonial rule, Cyprus’ truncated independence, the coup and Turkish invasion, and the decades of negotiations to stitch the divided island back together, plus a myriad of scandals, murders, and human interests stories that capture the island and its -people. Observers describe it as politically conservative.