Offshore inflows boost tax revenue

Capital inflows and deposits from offshore companies helped boost revenues recorded by the Cyprus Inland Revenue Department by 8.9% year on year in January-September, with revenues reaching CYP 450.2 mln compared with CYP 413.3 mln in the same period of 2004.

The increase in revenue is reportedly largely the result of offshore company activity, which has boosted both the corporate tax intake and the defence tax (“the special contribution for defence”), which is levied on corporate dividends and on interest paid on deposits.

The Financial Mirror assumes that this, in turn, is connected with a bumper year for the shipping industry, which has been boosted by high oil prices and tight capacity that has pushed up freight rates.

Defence contribution revenue rose by 20.8% to CYP 81.7 mln, compared with CYP 67.6 mln in the first nine months of 2004.

Corporate tax revenue rose by 16.5% to CYP 146.2 mln, compared with CYP 125.5 mln in Jan-Sep 2004.

Capital gains tax revenue, on the other hand, fell by 2.3%.

The Finance Ministry initially forecast a 4% fall in income tax revenue this year.

The government is attempting to increase revenue from the self-employed, after figures showed a suspiciously small number of people reporting income above the first threshold of CYP 10,000 and even fewer reporting income above the top threshold of CYP 20,000.

The self-employed include professions such as lawyers and doctors.

Income tax from the self-employed fell 14.1% year on year on January-September.