Cyprus CB chief wants special capital gains tax on deposits

The government should install a special tax on capital gains from bank deposits to finance the restructuring of its banking sector, Central Bank Governor Panicos Demetriades was quoted as saying.
"Taxing 10% of interest income for example would generate a substantial amount of revenue for the government," Demetriades told the Wall Street Journal in an interview a day after Eurozone finance ministers agreed a bailout for Cyprus by the end of March, without specifying how the rescue will be financed.
He estimated that such a tax "would generate as much as 150 mln euros a year."
The "special solidarity levy for Cyprus", as he called it, would only be applied for three years, which would be the time frame for an international rescue. It may be imposed on the dividend on deposits, which is already subject to a 15% tax.
"This is not a haircut and it's not a stealth tax. It could be implemented without undermining investors' confidence in the banking system and – unlike a tax – it could also apply to non-Cyprus residents," he said.
President Nicos Anastasiades promised last week to work for a swift deal to prop up the island's banks, which need capital of 6-9 bln euros, according to a hotly disputed due diligence by global fund manager PIMCO.
Demetriades also repeated his criticism of the idea of having bank depositors participate in the rescue of the country's banking system, adding that privatisation of state-owned property could earn 4.5 bln euros for the government.