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The debate on taxation of excess profits opens

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<p><strong>Tax authorities and governments are now targeting the super profits of European businesses that recorded unprecedented profitability in the last two years due to the energy crisis, uncontrolled inflation, but also the “greed” of businesses, as the OECD has characterized the dizzying price increases, and with it international organizations and consumer organizations.</strong></p>
<p>The taxation of “windfall” profits started with the energy crisis in the EU and now more and more governments are using this tool to balance their budgets.</p>
<p>At the same time, they consider that they also have a political benefit, as they limit the popular outcry about the high profits made by companies, while the citizens suffer from the accuracy. The debate was brought back to the fore last week by the Italian government's surprise levy on banks, which rattled international markets. Although the Italian government eventually relented by significantly reducing the tax, the issue is once again topical.</p>
<p>In Cyprus, political exhortations to banks to hold back some of the interest rate hikes coming from the ECB to provide relief are regular. borrowers who are being hit by punctuality and increased installments.</p>
<p><strong>A large portion of the House is sharpening swords</strong>as there is talk of legislation that would tax excess profits.</p>
<p >The Minister of Finance, Makis Keravnos, understands the complexity of the issue and with a third letter to the banks sounds the alarm about the effects, such as the increase in the cost of living for households, the increase in lending rates on housing loans, as well as the corresponding pressures on small and medium enterprises.</p>
<p>Beyond the specific effects, according to the Minister,<strong>serious effects are also created on the development course of the Cypriot economy. </strong>Of course there are banks that have announced and are implementing rate hike containment plans in an effort to provide relief to their customers.</p>
<p>At the same time, deposit rates have increased, but the “scissor” with lending rates is still very large, with the result that banks' profits are also increasing. The issue will also concern the Parliament at the first meeting of the Trade Committee on August 29, in the presence of the Minister of Finance and the Governor of the Central Bank.</p>
<p>The parties<strong> AKEL, EDEK, ELAM and Environmentalists, </strong> suggest taxing banks on their excess profits, but also targeted subsidies to mortgages that are at risk of not being serviced.</p>
<p class=Extraordinary taxes in the EU strong>

A total of 24 EU countries have announced, proposed or implemented an emergency taxon windfall profits at energy companies, which European Commission officials proposed after energy prices soared in early 2022.

The UK has also imposed a tax on profits derived from the extraction of oil and natural gas from the North Sea.

Hungary has imposed levies on all financial institutions, including insurance companies, as well as pharmaceutical groups. Portugalintroduced a 33% levy on food distributors with excess profits arising in 2022 and 2023.

Croatia went even further by introducing an extraordinary tax potentially applicable to all companies that they announce revenues of more than 300 million kroner (40 million euros) for 2022.

Bulgaria is also planning an economy-wide emergency tax. In other countries, the areas covered by extraordinary taxes have expanded even further.

Interest income targeted

But banks have increasingly become a target, with the Czech Republic, Lithuania, Spain and now Italy imposing strong>charges to the domain. Latvia could follow.

The Italian government backed outin part to the new tax on bank windfalls, saying it would introduce a cap that would limit the impact on many of them after a wave of liquidations in the markets that wiped about $10 billion off their market capitalization in a single day .

Specifically, as Bloomberg reports, the extraordinary tax will not exceed 0.1% of a bank's assets, and those that have already increased the interest rates they give to their depositors will not have a significant impact, said the < strong>Ministry of Finance of the country.

The funds resulting from the levy will be allocated in a special fundto help protect families and consumers from the effects of rising interest rates. This could also help Italy's fragile finances if government revenue targets are missed.

Interest income is at record levels.of European banks over the past year, “tempting” some governments to tax them just before the end of what appears to be a high-profit cycle.

According to a Bloomberg poll< /strong>, analysts predict that only two of the 20 largest banks in Europe will continue to see an increase in the annual growth rates of NII (Net Interest Income), i.e. net income from interest, in the third quarter.

< p>Of those 20 banks, five are expected to even post a fall in the fourth quarter, with the largest (19.5%) discount for Austria's Raiffeisen Bank, according to analysts.

“Extraordinary taxes are attractive because they are intuitively fair,” comments Christian Hallum, head of tax justice policy at Oxfam. “We have a situation where millions of people are struggling and many companies are making record profits. It is simply unfair”.

Greece does not follow the Italian model

The Greek government is putting a brake on the debate about an extraordinary tax on banks, which was re-ignited by the decision of Georgia Meloni to impose a levy on the surplus profits of Italian financial institutions, clarifying that the controversial model could not be implemented in Greece.

The country is a “step” before the recovery of the investment grade. Therefore, such a move would send the wrong message to international houses, since the “health” of the banking system is one of the criteria they consider before making any decisions.

The low profitability of the domestic banks, has always been a 'thorn' in the evaluations.

It is worth mentioning that after R&I and Scope which proceeded in the immediate previous period to upgrade the Greek public debt, the “baton » get DBRS on September 8, Moody's in the middle of the same month, Standard & Poor's on October 20 and Fitch at the end of 2023.

source: Philenews

Source: 24h.com.cy

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