Opposition AKEL party has encountered renewed resistance to its proposed taxation of banks’ excess profits stemming from increased interest rates.
The proposal was rebuffed by the executive branch, the Central Bank, and the Association of Banks during a parliamentary finance committee meeting.
The bill, put forward by AKEL, suggests imposing a 5% extraordinary solidarity levy on banks, with proceeds earmarked for a Social Solidarity and Borrower Support Fund.
Giorgos Panteli, Director General of the Ministry of Finance, expressed reservations about the bill, warning it could undermine the country’s credibility and deter investors. He noted that from 2013 to 2022, the banking system experienced instability and contraction, with losses of €670 million between 2016 and 2022.
Panteli highlighted that Cyprus already imposes a 0.15% credit fee, which has generated €900 million in revenue. He cautioned that the proposed tax could either be absorbed by banks’ capital or passed on to consumers, potentially affecting loan provisions.
A Law Office representative identified constitutional issues with the bill, arguing that levy imposition and fund operation should be managed by the executive branch.
Michalis Kronides, speaking for the Association of Banks, stated that banks have paid €400 million in special taxes over the past four years. He emphasised that bank profitability strengthens the banking system’s resilience and supports economic financing.
Michalis Persianis, President of the Fiscal Council, advised caution regarding the management committee and suggested including this taxation in the overall tax reform.
Despite opposition, the Ministry of Finance will seek the European Central Bank’s opinion on the bill at MPs’ request.
AKEL MP Andreas Kafkalias maintained that the issue concerns social justice, urging the bill’s approval before year-end.
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