ECONOMY

Fewer secret bank accounts

NICOSIA (Reuters) – Cyprus plans to limit the secrecy offered by numbered bank accounts to combat tax evasion, but the move has triggered a chorus of disapproval from commercial banks worried about the flight of capital from the island. The Finance Ministry has a bill pending in Parliament that would compel commercial banks to blow the whistle on depositors with secret cash now stashed beyond the reach of the tax authorities. Authorities say the move is part of a plan to offer the anonymous rich the option of coming clean on their accounts and paying a reduced tax rate instead of being found out and paying higher penalties. Figures vary, but some estimate there are 6 billion Cyprus pounds ($12.48 billion) tucked away in secret accounts. Commercial banks say the plan is ill-timed and could put the Cyprus pound under pressure, crucially on the eve of lifting all restrictions on currency flows in preparation for European Union membership next year. «After deregulation in May, there will be an increased possibility of funds flowing out of Cyprus,» the chief treasurer at a Cypriot commercial bank said. Worries about pressure on the national currency, the Cyprus pound, are exacerbated by the fact that 700 million pounds is deposited in external accounts which could be exchanged at any time, he said. Lifting bank secrecy would only be applicable for local residents and not foreign companies, but they too have their misgivings. «It caused a lot of anomalies in the market place and at the end of the day it’s not good for business development,» Chris Koufaris of the international business association, CIBA, was quoted as telling the Cyprus Mail daily. Finance Ministry spokesman Michalis Papadopoulos dismissed concerns of a capital flight. «We do not expect that… 70 percent of these accounts are used as collateral for loans so they cannot remove it anyway.» If some did try to remove their cash they would run the risk of being found out and facing the effect of present tax laws instead of the 5 percent offered by the amnesty bill, he added.