Future as finance centre put at risk

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Future as finance centre put at risk

Post  Twosox on Mon Apr 14, 2008 8:41 am

Courtesy of Cyprus Mail http://www.cyprus-mail.com/news/

The island’s reputation as a financial centre is under threat from a call by some EU member states to implement a flat EU-wide corporation tax of 30 per cent.

Finance Minister Charilaos Stavrakis has warned that larger European countries including France and Germany are pushing for the uniform corporation tax throughout the EU.

For Cyprus, this would mean a trebling of the current tax rate, which rests at ten per cent.

“This would be catastrophic for us,” Stavrakis said.

“Cyprus is a financial centre which attracts foreign investment and the low rate of corporation tax is the strongest weapon we have.”

The Minister was not willing to accept the measure without a diplomatic fight.

“Despite our small size, we will fight such propositions with all our strength,” he said.

Moreover, in these efforts, Cyprus would be joined by other countries with a low tax co-efficient, such as Ireland and Luxembourg, Stavrakis said.

Before EU accession, Cyprus corporation tax varied according to whether a business was local or international.

The EU regarded this as discrimination between local and foreign businesses, and forced Cyprus to impose a flat rate corporation tax on all businesses, irrespective of origin.

“Should the increase in corporation tax materialise, international businesses would be very unhappy,” said Mehran Eftekhar on behalf of the Cyprus International Businesses Association (CIBA).

“It will dramatically and drastically affect the competitiveness of Cyprus in its effort to become a financial centre,” said Eftekhar, who is Chairman of CIBA’s Taxation Committee.
“We’re already highly taxed this year: the level may be set at ten per cent, but with taxes on interest and on dividends, it comes out to be much more in practice.

Eftekhar pointed out that, “Cyprus has climbed the Forbes index of tax misery this year”, a sign which could discourage foreign investment.

CIBA is set to meet with the Finance Minister on April 17, and Eftekhar said that the issue would be high on the agenda.

“Mr Stavrakis is a good friend of international businesses.

“He is a focused and good Minister in terms of making Cyprus a financial centre for the region.
“The purpose of the meeting is to find a common understanding.

“We want to help Cyprus and the last thing we want to do is to be counter-productive,” the CIBA man said.

Eftekhar thought that a uniform tax rate for the EU was still far away.

“Many countries won’t stand for this: the United Kingdom has only recently lowered its corporation tax to 35 per cent, while Ireland and Luxembourg won’t accept it.”

An official at the Finance Ministry confirmed this: “We are not the only ones who are unhappy about the proposal, and we are not the sole country that feels its economic strength threatened by it.”

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