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18 Mar 2013
Forex Flash: The curious case of taxation in Cyprus – Deutsche Bank
FXstreet.com (Barcelona) - Although EU leaders have made it clear that the shock resolution in Cyprus is a one-off it has surely changed the landscape in Europe and now provides a template that will be at least on the table, even as a bargaining chip only, in the years ahead.
According to Macro Strategy Analysts J. Reid and C. Tan at Deutsche Bank, “The real damage here is going back on the Government's pledge to honor all deposits up to Euro 100k - one that now exists EU wide. It's clear that the Cypriot Government was given the alternative of a chaotic default where arguably much more would have been lost for many.” However, could the authorities not have taxed the uninsured depositors more than the 9.9% and kept those with under 100k whole as opposed to a 6.75% levy?
Earlier reports have suggested that this is one area that might be up for internal negotiations within Cyprus before the banks re-open tomorrow after today's holiday. Indeed, The FT is reporting that deposits over 100k could see an increased rate of 12.5% while smaller deposits would be levied at 3.5% in an effort by President Anastasiades to scrape together a parliamentary majority to approve the bailout. Martin Schulz, head of the European parliament, while agreeing that savers should bear some of the bailout costs, called for changes to exempt those with savings under €25,000.
According to Macro Strategy Analysts J. Reid and C. Tan at Deutsche Bank, “The real damage here is going back on the Government's pledge to honor all deposits up to Euro 100k - one that now exists EU wide. It's clear that the Cypriot Government was given the alternative of a chaotic default where arguably much more would have been lost for many.” However, could the authorities not have taxed the uninsured depositors more than the 9.9% and kept those with under 100k whole as opposed to a 6.75% levy?
Earlier reports have suggested that this is one area that might be up for internal negotiations within Cyprus before the banks re-open tomorrow after today's holiday. Indeed, The FT is reporting that deposits over 100k could see an increased rate of 12.5% while smaller deposits would be levied at 3.5% in an effort by President Anastasiades to scrape together a parliamentary majority to approve the bailout. Martin Schulz, head of the European parliament, while agreeing that savers should bear some of the bailout costs, called for changes to exempt those with savings under €25,000.