Cyprus cuts Q1 budget deficit in half

The government cut its budget deficit in half in the first quarter of 2012, thanks to both an increase in revenue and a reduction in expenditure.
Revenue rose in January-March by 9.5% over the year earlier to EUR 1,756.0 mln, while expenditure fell by 0.6% to EUR 1,904.0 mln.
The resulting deficit shrank to EUR 148 mln from EUR 310.7 mn in the same period of 2011.
The government aims to cut the budget deficit to less than 3.5% in 2012, from 6.3% in 2011.
Revenue will have been boosted by the 2 percentage point increase in VAT from 15% to 17% effective from March 1st.
The Statistical Service Cystat said that taxes on production and imports rose by 2.4% to EUR 602.7 mln, of which VAT rose by 4.5% to EUR 342.2 mln.
Taxes on income and wealth rose by 26.6% to EUR 540.3 mln, perhaps as a result of the new top rate of income tax at 35% as well as an increase in tax on bank interest.
Revenue from sales of goods and services dropped by 1.2% to EUR 109.5 mln.
On the expenditure side, compensation of employees (including imputed social contributions and pensions of civil servants) rose by 3.9% to EUR 672.6 mln, despite the 2% cut in gross pay and two-year freeze in inflation-linked pay rises.
Social transfers fell by 6.4% to EUR 583.6 mln, owing to cuts in entitlements, and intermediate consumption fell by 1.7% to EUR 199.5 mln.
Current transfers dropped by 22.4% to EUR 106.8 mln and capital formation (investment) fell by 9.3% to EUR 98.9 mln.
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