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Cyprus scraps tax on smaller deposits

Mar 19 2013 12:22

A woman holds a banner during a protest outside of the parliament in Nicosia, Cyprus. (Petros Karadjias, AP)

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Nicosia - Cyprus's revised draft bill for a levy on bank deposits scraps the measure for savings under €20 000 but does not compensate for the resulting lost revenue by raising it for the wealthy.

The draft, seen by Reuters, did not say if the new structure for the levy raises the required €5.8bn European officials have demanded in return for €10bn in aid.

The bill sets a zero percent levy on deposits of up to €20 000, a 6.75% rate for amounts between €20 000 and €100 000 and maintains a 9.9% tax on all deposits above that level.

Under a previous agreement struck by euro group finance ministers on Saturday, all deposits below €100 000 would have been taxed at 6.75% and everything above at 9.9%.

After an outcry in Cyprus and abroad against the move, eurozone finance ministers urged Cyprus on Monday to scrap the levy below €100 000 to spare small savers, and raise it instead for richer bank clients, to 15.6%.

But Nicosia was reluctant to agree to such a move because it fears it would scare away foreign depositors, mainly from Russia, and undermine the country's banking-based business model.  

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