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The Cypriot parliament on Thursday voted down a government bill to raise corporate tax by one percentage point to 11 percent, saying it could damage the island's fragile economic recovery.

The tax plan was rejected by a majority vote in Cyprus' 56-member parliament with a show of hands.

Only MPs from the Communist AKEL, the senior partner in the left-wing government, backed the move.

Cypriot authorities had banked on the tax as part of a broader gameplan to lower a projected 7.0 percent deficit this year to 3.0 percent by the end of 2012. MPs also voted against a government bill to change tax on real estate.
Cyprus has a presidential system of government, and no party has an outright majority in parliament.

"The message sent (with passage of the legislation) would have been of tax regime instability and would damage our services sector," said Nicos Anastassiades, head of the main opposition Democratic Rally party.

The Democratic Party, a junior partner in government, also voted against the bill.
Cyprus' 10 percent corporate tax is among the lowest in the 27 member EU. Business groups were strongly against raising tax, saying it would stifle a nascent economic recovery.

AKEL had said the tax increase was warranted to evenly spread the burden of emerging from the financial crisis.

Financial Mirror, July 08, 2010
|||Cyprus parliament rejects 1percent corporate tax hike to 11percent
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