By Jean Christou
THERE WERE mixed reactions yesterday to the taxing of stock exchange profits for 1999 and the imposition of a new levy on transactions for the next two years.
Cyprus Stock Exchange (CSE) chairman Dinos Papadopoulos said he was satisfied with the decision. He said the CSE had been asked for its views on the issue of the levy and had requested that it be as low as possible in order not to affect transactions.
Parliament on Thursday reached a consensus on the controversial issue of taxing stock market profits after weeks of public debate on whether to impose capital gains tax on money made by investors.
In the end, deputies unanimously agreed to tax those 1999 stock market profits that exceed £35,000. Individuals will be taxed at a rate of five per cent and companies at the 20-25 per cent corporate rate. Profits of up to £35,000 are exempt.
For 2000/2001, deputies agreed, instead of taxing profits, to impose a levy on transactions of 0.6 per cent for individuals and one per cent for companies.
The issue of capital gains tax is to be discussed at a later date because of its complex nature.
“I’m glad to see that the issue of the levy is being seen as a temporary measure,” Papadopoulos said.
“It has advantages from the state’s point of view in the sense it has low collection costs but it is a cost on transactions so therefore could be discouraging (for investors).”
Christodoulos Ellinas, chairman of the Brokers Association, said the £35, 000 tax free sum was very low but added that overall brokers were satisfied.
Kypros Proptopapas, the vice president of the Investors Association, said the levy was premature, but welcomed the fact that the uncertainty on the market had been brought to an end.
He said, however, that he believed the 20-25 per cent corporate tax rate for companies profiting over £35,000 was steep for smaller enterprises. “These people are being treated unfairly,” he said. “They should have made a distinction between big investment companies and small ones.”
He also said the £35,000 tax-free ceiling was too low and that he felt no tax should have been imposed for 1999.
The government had initially sought to tax stock market profits on the basis of capital gains tax, which stands at around 40 per cent but only applies to income from property.
Opposition parties, communist Akel and socialist Edek, were strongly in favour of a substantial rate of tax, but it was vehemently opposed by ruling right-wing Disy, which said it would support a five per cent tax for 1999 and none for two years thereafter.
Although it voted for the consensus reached on Thursday, Edek said the tax- free ceiling should have been as low as £10,000.
