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Cyprus has lowest labour & corporate tax in EU

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Cyprus has lowest labour & corporate tax in EU

Postby Sotos » Sun May 28, 2006 6:17 pm

Cyprus has lowest labour & corporate tax in EU



24/05/2006
www.financialmirror.com

But highest environmental tax


Cyprus has the lowest tax on labour in the EU and the lowest corporate tax rate, according to figures released by European Commission Services, but has the highest ratio of environmental taxes as a proportion of GDP.

The “implicit tax rate on labour” (ITR)--see note below--was 23.1% in 2005, the lowest rate in the EU, compared with an EU25 average of 35.9%. The second lowest rate was the UK, at 24.8%.

The list of countries on labour excluded data on Poland, Portugal, Slovakia and Norway, although we know that Poland, Slovakia and Norway, at least, are not famous for low labour taxes.

Key reasons for Cyprus’ good score on labour are no doubt the high threshold for income tax (the first CYP 10,000 is tax-free), the low top rate (30%) and the comparatively low social security contribution rate (6.3% for employees and even less if you work for the government).


Lowest corporate tax rate in the EU


Something that has escaped the attention of a distinguished international magazine twice in the past few weeks is that Cyprus has the lowest corporate tax rate in the EU, at a flat rate of 10%.

The next lowest is Ireland at 12.5%, while the EU average is 25.9%.

Cyprus may have escaped attention of the rest of the world because of the confusion caused by the surcharge imposed on profits above CYP 1 mln in 2004 and the fact that semi-government organisations are taxed at 25%.

Clearly, the EU thinks that the semi-government organisations don’t count, and has listed the top rate at 10%.


Tax on consumption has risen sharply


As any Cyprus-dweller will tell you, tax on consumption has risen sharply in recent years, from an ITR of 12.2% in 1995 to 19% in 2004, compared with an EU25 average of 21.9%.

The sharp increase in Cyprus is largely owing to a rise in VAT from 8% to the EU minimum of 15% over a relatively short period (because the parliamentarians put it off as long as possible).


Relative burden of environmental tax is high


While scoring well on labour and corporate tax, Cyprus comes bottom of the class for environmental taxes, at 11.9% of total tax revenue, compared with an EU average of 6.6%.

Transport taxes are the the highest (as a proportion of total tax revenue) at 5.7%, while energy taxes are higher than average at 6.2%.

The near total absence of public transport, combined with a climate in which gas-gobbling air-conditioning is used by drivers for around four months a year, could be the main reason.


Fiona Mullen


*For those at www.cyprus-forum.com who had a full-scale discussion on these issues last time we wrote about them, the Commission says the implicit tax rate is “the preferred indicator for the average tax burden”. The ITR on labour “includes all personal income taxes, payroll taxes and compulsory social security contributions and, as the tax base, the total amount of compensation of employees in the economy. The average may conceal important variations in the tax burden across the income distribution.”


Living in Cyprus does have some benefits then :)
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Postby cypezokyli » Sun May 28, 2006 7:10 pm

soto , low taxes are in general a characteristic of capitalist states :wink:
we should actually be in favor of high taxes (especially for the rich - not VAT ) and high social benefits.
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Postby Sotos » Fri Jun 02, 2006 12:03 am

soto , low taxes are in general a characteristic of capitalist states
we should actually be in favor of high taxes (especially for the rich - not VAT ) and high social benefits.


How about low taxes and high social benefits? :P Where do we rank in social benefits? Do you know?
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Postby cypezokyli » Fri Jun 02, 2006 1:54 am

Sotos wrote:
soto , low taxes are in general a characteristic of capitalist states
we should actually be in favor of high taxes (especially for the rich - not VAT ) and high social benefits.


How about low taxes and high social benefits? :P Where do we rank in social benefits? Do you know?


low taxes and high social benefits :? :lol:

if only there was a way
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Postby venusdee » Fri Jun 02, 2006 8:02 am

What beats me is how a Cypriot earns £350 whereas in the UK the same job pays up to £2500.00.......... blast the low taxes......... pay me the correct pay and take half of it. So we pay less social security, a lot of good that does us when we are 65 and we have to scratch around on £200 and they live like kings on £1200 or more. :(
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Postby Sotos » Sat Jun 03, 2006 12:22 am

What beats me is how a Cypriot earns £350 whereas in the UK the same job pays up to £2500.00

Exaggerations ;)
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Postby venusdee » Sat Jun 03, 2006 7:55 am

Really, perhaps you need to investigate further, cause I have. My sister in law works in an old age home in the Uk and she takes home uk£2200 (her friend works longer hours for £2500) and my cousin works here in Cyprus doing the same work for cyp£350. I have a degree and the most I've been offered is cyp£550 and yet my brother in law who is in the uk is a mechanic and he earns uk£2800.
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Postby Piratis » Sat Jun 03, 2006 3:47 pm

Venusdee, you are of course right that salaries in UK are much higher than in Cyprus. There is absolutely no doubt about that.

But you should always remember some points:

1) 1 Cyprus pound = 0.82 UK pound. So you have to take 18% off the UK salary.
2) Taxes in UK are much higher.
3) Cost of life in the UK is higher.
4) It makes it easier to run your own company in Cyprus since you have to pay less for salaries (if we look this issue from the opposite point of view)

Therefore there is a difference, but it is not as huge.

If salary is the the single most important factor for choosing a place to live then UK is definitely better than Cyprus. However this is not the only criterion for many people.
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Postby Kikapu » Sat Jun 03, 2006 4:01 pm

Piratis wrote:Therefore there is a difference, but it is not as huge. .


The difference is, that a Cypriot will not be able to afford to travel abroad, even within the EU, and not feel like it's costing him an arm and a leg. Also buying imported goods will cost him a lot in Cyprus.
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Postby Sotos » Sun Jun 04, 2006 12:41 am

The difference is, that a Cypriot will not be able to afford to travel abroad, even within the EU, and not feel like it's costing him an arm and a leg. Also buying imported goods will cost him a lot in Cyprus.


Many Cypriots travel abroad. Almost 50% of them every year I think. Here is the stats for trips of Cyprus residents abroad http://www.mof.gov.cy/mof/cystat/statis ... penElement
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