Cyprus tax revenue growth stops as property boom ends

The Inland Revenue Department (IRD) announced that total tax revenue during the period January-May 2008 advanced by 1.1% year-on-year to EUR 651.6 mln from EUR 644.77 mln a year ago in the same period with the disappointing performance due to a sharp decline in revenue from property taxes as the property boom ended.

Capital gains taxes, mostly composed of profits made on property deals dived 16% YoY to EUR 144.38 mln in Jan-May 2008 period compared to EUR 171.48 mln a year ago, whereas tax on property deals dived 22% to EUR 2 mln.

Cyprus recoded a surplus in 2007 equivalent of 3% of GDP on the back of an unexpected increase in tax revenue on property deals. But since the boom ended and property prices started heading lower, activity in the sector has dwindled to a halt, pushing state revenue lower.
The one bring spot for the state of finances for the government was the increase in revenue from the Special Contribution for Defence, up by 23.3% YoY to EUR 180 mln. Revenue from Corporation Tax advanced by 6.2% YoY to EUR 100.1 mln, whilst revenue from employees fell 2% to EUR 165.5 mln.