THE government intends to impose a €1,000 tax on profitable companies for two years in a bid to boost state revenues, it was announced yesterday.
The levy could yield some €100 million per year for 2011 and 2012 and is considered to be the business’ contribution towards tackling the economic crisis.
The measure will only affect companies, which have been making profits in the past three years.
“Responding to an appeal by President (Demetris) Christofias we say that businesses recording profits are ready to view the annual contribution of €1,000 for two years positively,” said Manthos Mavromatis, chairman of the commerce and industry chamber (KEVE).
The government said that if around 100,000 of the 170,000 companies – Cypriot and foreign – registered in Cyprus pay the tax, it would mean €100 million in revenues for state coffers.
Mavromatis said Cyprus no longer has the option of inaction.
“The Cypriot economy needs to take measures today to be able to convince everyone … that state finances are on a sustainable course mid and long term,” Mavromatis said.
Filios Zahariades, the chairman of the employers’ federation, said he hoped the new measure, which will be discussed by the organisation’s members, will further improve the index.
The announcement was made after business chiefs met with Christofias yesterday.
The two sides also discussed taxing immovable property – a measure rejected by parliament last year.
“There was a preliminary discussion, which we will continue to see how the immovable property tax will become better and fairer, and we will revisit the matter,” Zahariades said.
Christofias’ meeting with employers came a day after he met public sector union bosses, with a view to convince them to contribute €70 million – for two years – to the effort of shoring up state finances.
The employers’ contribution was a basic condition set by the unions before they agreed to any cost-cutting measures in the public sector.
Unions seem positive towards a government proposal to cut a small percentage – depending on the amount – from civil servants salaries for two years in a bid to save €35 million a year.
Those earning around €1,500 per month will not be affected.
Public sector workers have already agreed to no general pay rises for 2010 and 2011.
But the government still needs to resolve the unsustainable state pensions system.
KEVE’s Mavromatis said these measures are not enough to resolve the structural problems of the economy.
“The most significant and biggest challenge to make state finances viable again is the pensions system,” Mavromatis said.
Mavromatis said if the matter was resolved before parliament closed for the summer holidays in July would be the best message to international markets.
