CYPRUS MAIL: THE ONE-OFF levy on bank deposits agreed between Nicosia and international creditors will impact all Cypriot account holders.
In addition to Cypriot commercial and co-operative banks, Barclays, Russian Commercial Bank and Societe Generale, among others, would be affected.
“As we understand it, anything with credit will be subject to the levy, be it a deposit or current account,” bank sources said.
The Cyprus deal means the country’s savers, almost half of whom are believed to be non-resident Russians, are asked to pay up to 10 per cent of their deposits to raise some €5.8 billion for the government.
International lenders will put up around €10 billion to help the island pay back its debt. People with less than €100,000 in Cypriot bank accounts will have to pay a one-time tax of 6.75 per cent, while those with more will have to pay 9.9 per cent.
Euphemistically dubbed a “solidarity levy,” what it amounts to is a haircut on deposits, economic analysts said.
Savers will be ‘compensated’ in the form of bank shares of an equal value to the amount contributed, finance minister Michalis Sarris told the state broadcaster.
In addition to the levy, Sarris said, a 20 to 25 per cent tax will be imposed on the interest on deposits.
And in return for emergency loans, Cyprus additionally agreed to increase its corporate tax rate by 2.5 per cent to 12.5 per cent.
The deal was reached after late-night discussions in Brussels with the International Monetary Fund (IMF).
In return for the €10 billion bailout, Cyprus has been asked to reduce its deficit, shrink its banking sector and increase taxes.
Bank sources said a run on bank ATMs started from Friday night – while the Eurogroup was in progress –peaking yesterday morning as soon as news broke from Brussels.
“The ATMs are running out of cash,” a source said.
The frenzy of withdrawals was triggered by savers likely thinking that by reducing their bank balance they would reduce their taxable amount.
However understandable, it was probably an exercise in futility, because the taxable amount will apply retroactively, from the moment the deal was struck in Brussels. » | Elias Hazou | Sunday, March 17, 2013
