By Hermes Solomon
On the morning of Saturday, May 18, I visited the co-op bank – SPE Strovolos – where I discussed with an assistant manager and counter clerk my options now a fixed term deposit account had matured.
Although the term was for one year at 4.5 per cent, I was taxed (defence) at 30 per cent on the total amount of interest and not just on that part of the interest earned from May 1 – the date the ministry of finance decreed a 15 to 30 per cent increase in tax on bank interest.
When I complained that retroactive taxation was unconstitutional, I was advised to sue the Central Bank/ministry of finance and not SPE Strovolou, with whom I’d made the contract in the first place.
I could withdraw 20 per cent in cash – and that meant 20 per cent of capital including interest after tax – but they did not have that much cash on hand on a Saturday morning and could only give me half with the balance on Monday. The clerk collected the half in ‘bits’ from five other tills, saying SPE were waiting for a G4 truck to arrive to stock up because they’d almost run out.
Now, what I and many similar complainants would like to know is what is the law concerning taxation at 30 per cent on interest on say a three year term deposit – does this mean that the bank can tax the total interest at 30 per cent simply because the contract matured three weeks after the new defence tax increase decree was announced?
I contacted an undersecretary at the ministry of finance and was told, “Yes, the 30 per cent tax on entire interest on maturing term deposits is unconstitutional since no law was passed in the House permitting this facility. It came as a directive to all banks from the finance ministry regardless of legality.”
So is it a disguised kourema, I asked.
“You could put it that way,” he said.
The co-op’s attempt to sell shares/bonds in an effort to recapitalise will go the way of Laiki. The only reason they haven’t been closed down so far is that co-op loans to borrowers now hugely outweigh secured deposits. Can the Central Bank/government/co-op still guarantee depositors up to 100,000 euro deposits? Are we to expect a haircut on deposits below 100,000 or will they give us IOU’s maturing in 2050?
By not paying the 20 per cent allowable in full and on demand and forcefully depositing the 80 per cent balance for a further month at one and a half per cent interest with comments like, “We are attempting to avoid a run on the bank” they are in fact encouraging one…
Went again to SPE Strovolou on the following Monday morning to collect the balance and transfer money abroad – when the foreign desk admitted an earlier mistake regarding transfers abroad – it’s 5000 per person per bank per month and not 5000 per person only. Good news for those with accounts in three or four different banks.
When I suggested I could get half a dozen friends to transfer 5000 euros a month to a high interest ‘safe’ bank account abroad or illegally take cash north and send out as much as I like in one go, they said there was nothing stopping anyone from doing so, suggesting the Central Bank/ministry of finance ‘restrictive measures’ were ridiculous – because of course, they are – destroying normal commercial activity and turning us all into miscreants.
The banks in the north are offering four per cent interest on term deposits with 10 per cent tax on interest. By our banks offering 2.75 per cent interest on term deposits taxed at 30 per cent, our banks are encouraging diarrhoea of the banking system. Overnight they have reduced income by half to savers and are yet to reduce interest by half on loan interest charged to borrowers. I don’t mind helping borrowers, but I hate to be persistently taken for a ride by a bunch of ‘crooks’!
I know, I shouldn’t complain when thousands are losing their jobs, others living on a knife edge of insecurity and most employees in the private sector taking hits on their income of up to 40 per cent.
One of our leading companies is now paying their employees 80 per cent of their salaries (it was 30 then 50 per cent) in coupons exchangeable for goods in any of their many stores. Is that not theft or are we being driven towards bartering rather than the free exchange of capital for goods? After years of profligacy I don’t need a new car, fridge or expensive clothes. My major requirements are food, shelter and security for my family – not ‘fancy’ goods!
Five years ago I wrote cash is king in my Sunday Mail article ‘Buy Pasta’. Little did I know that between a thousand to three thousand jobs will be lost at the ‘new’ Bank of Cyprus, if they manage to survive? That’s up to 50 per cent of the workforce, not forgetting the co-ops, where two thirds of their branches are envisaged to close down. Jobs are flying out of the window while this government promises to employ 1600 ‘road sweepers’.
The seriousness of Cyprus’ economic plunder will be known by the end of this summer’s tourist season. Then what? Will we see the nation growing toothless – unable to afford 300 euros for a crown, 1200 for a ‘screw-in job’ and any price at all for a set of false teeth? Will citizen comportment resemble that of the petit paysan of late 18th century pre-revolutionary France – angry, dishevelled, disgruntled and riotously vengeful?
The Central Bank/government/banks must reassure rather than rob. They must stop finding devious ways and means around exploiting the ordinary saver, struggling companies and borrowers. First it was the shareholders/ bondholders, then those with unsecured deposits and now the ordinary saver. Where is this fiasco of injustice going to end? What will they steal from us when there’s nothing left – our homes?
Our heads are being held underwater and we are breathing air through a straw to survive. But the straw is turning into blotting paper and will eventually dissolve.
Fine words from Barroso, Schultz et Cie at EU HQ do not fill empty stomachs nor secure our peace of mind. Reliably honest and forthright leadership does. Come on, ‘Big Ears’, sort out the mess!