ECONOMY

Cyprus package to close wealth gap

NICOSIA (AFP) – The Cyprus government yesterday announced a wide-ranging 100-million-pound benefits and tax relief package aimed at improving living standards and closing the gap between rich and poor. President Tassos Papadopoulos said the package, equivalent to about -170 million, was affordable as the government had reined in spending to ensure it met EU single currency convergence targets. Papadopoulos, who is expected to announce later this month his plans to run for re-election in February 2008, also pledged «no new taxes» would be imposed on the Cypriot public. The cabinet-approved measures need to be passed by parliament, although this is seen as a formality with the government holding a majority in the house. Last month EU leaders backed Cyprus’s plans to adopt the euro as planned on January 1, 2008. Under the scheme, tax-free income is raised from 10,000 pounds (about -17,120) to 10,750 pounds for 2007, with the ceiling extended to 11,350 pounds in 2008. «This gives Cyprus the highest tax breaks in Europe,» said Papadopoulos. The package includes increases of up to 15.8 percent in low-end state pensions, a reduction in value-added tax on some products and services to 5 percent from 15 percent, longer maternity leave, plus more money for people with special needs and the long-term chronically ill. VAT decreases – on various food items, animal fodder, contraceptives, bottled water and juices – had been approved by Brussels, said Papadopoulos. Finance Minister Michalis Sarris said the aim of the package was to ease the tax burden and improve the living standards of Cypriots, currently at 94 percent of the EU average. «The economy is positive and meeting our euro targets has given the government the opportunity to provide this social cohesion package,» Sarris told a news conference. «Our eurozone entry is the greatest confirmation of our success.» Cyprus enjoys full employment, low inflation, high economic growth and a continual downward trend registered in the public debt and budgetary deficit, Sarris said. Economic growth stands at 3.9 percent of gross domestic product, inflation is 1.4 percent, unemployment 3.8 percent and public debt 61 percent of GDP. The Cyprus pound will be locked into the euro on July 10. Cyprus joined the 27-nation bloc on May 1, 2004 and formally applied to enter the eurozone in February.