Cyprus said it planned to temporarily increase corporate tax by one percentage point to 11 percent, as the island struggles to contain a widening public deficit.
“This will be for two years. It is a temporary measure to improve the budget position,” Cypriot finance minister Charilaos Stavrakis told Reuters. The plan would require ratification by Cyprus’s parliament.
On the basis of some 730 million euros in corporate tax earnings in 2009, the state expected additional revenue of around 73 million euros from raising the tax rate, Stavrakis said.
He said the relevant legislation would be submitted to parliament for approval in coming days.
The European Commission started disciplinary steps against Cyprus for an expected breach of the EU limit on its budget deficit this year.
Cyprus is facing a deficit of 7.0 percent in 2010 without measures to rein it in, from 6.1 percent in 2009. The island has seen a considerable loss in revenue from a virtual collapse in its property market and in earnings from tourism.
Financial Mirror, 16 June 2010