Cuts civil service by mere 1,000 jobs
The government has approved a series of bills, which finalise the fiscal consolidation package that aims to bring the Cypriot economy within the EU reference values.
“Improvement in the public finances is a one-way street,” Finance Minister Charilaos Stavrakis said announcing the package.
The finalised package provides for the reduction in the number of state employees and containment of operational expenditures, social solidarity and cohesion, the targeting of social benefits and increasing public revenues.
Referring to the reduction of the public sector personnel, Stavrakis said Cyprus for the first time in its history has set the target of reducing the number of state employees by 1,000 persons. He said that in the first five months of 2010 the number of state employees has been reduced by 530 persons, which saved 14 mln euros. Stavrakis added that if the 1,000 person reduction target is achieved, Cyprus will save approximately 25 mln euros.
On the containment of operational expenditures, Stavrakis said that the state has already saved 80 mln euros by cutting non-essential operational expenditure, adding that the target for 2011 is 90 mln euros.
The Council of Ministers also approved a bill for social solidarity and cohesion envisaging a rise in corporate tax by 1 percentage point to 11% for two years, which is estimate to raise additional revenues of 75 mln euros.
“This is a very temporary measure which will be in force for two years and Cyprus will continue to maintain a very important tax margin from the rest European states,” said Stavrakis.
The Finance Minister also recalled the bills the government submitted to Parliament which will grant the Inland Revenue Department increased powers to fight tax-evasion.
With regard to the targeting of social benefits, Stavrakis said that the Council of Ministers approved a bill which increases the ceiling for child benefits and student funding from 60,000 euros to 70,000.
Referring to the increase of state revenue, Stavrakis said that the Council of Ministers has approved two bills. The first concerns the application of minimum excise duties on fuel as prescribed by the EU acquis and the introduction of 7 per mille tax for owners of immovable property which exceed 170,000 euros at 1980 prices.
Stavrakis added that the new tax concerns 8,000 large real estate owners, adding the 98.5% of the total population will not be affected.
Replying to a question whether the package will help Cyprus exit from EU supervision, Stavrakis said that Cyprus along with Denmark and Finland were the last EU countries to enter the EU excessive deficit procedure, noting that EU supervision is a technical process which sets a target that we should reduce budget deficit below 3% GDP by 2012.
To a question whether the Commission's recommendation that Cyprus should reduce the 2010 deficit below 6.0% of GDP and ensure an annual structural adjustment of 1.75% GDP over the period 2010-2012, Stavrakis said that this target is feasible, adding the government's effort is to exceed the targets set by the European Commission.
