Be Excellent To Each Other

I find this very sinister. A large part of the Cyprus debt is due to money they lent to Greece. Greece have had a huge bail out part of which was made possible by them telling creditors they were only going to pay 50% of their debts back. So I would assume Cyrus is stuck with some of this.

In addition Greece lied to get into the EU and is a largely irresponsible state that does not enforce taxation and also paid (and may still pay) unstainable public sector wages as well as conditions (final salary pension and early retirement)

So in exchange for a 13 billion Euro bailout and to raise a further 2 billion Euro, (a sum that is very small compared to other bailouts) everyone with savings is going to have to pay a levy in exchange for some worthless bank shares.

Ignored are the EU rules that protect the first 100,000 of any savings for starters.

The reason being that there is a lot of money in Cyprus banks that may or may be dodgy. I’ve read that this money is everything from proceeds of crime to rich people being tax efficient. To be honest I would tend to believe that anyone hiding crime money would not want it known on the BBC.

They then claim that Germany and others in the EU (which is being denied) insisted on the levy as they weren’t prepared to bail out rich Russians.

Regardless this is fundamentally wrong, savers are the backbone of a sensible, but these days viewed as boring banking system. They should not be punished due to a situation that was caused by risk taking, greed and too much credit.

Also it must be investment suicide for Cyprus , investors won’t touch them with a barge pole now.

Hope it’s not a sign of things to come

The EU want to make an example of someone, but someone who is small enough not to cause damage to neighbouring economies. Step forward Cyprus.

You have to wonder if this is the start of a larger plan. First find a state small enough to bully and implement this. They you have precedent so they can do it elsewhere.

All the EU have done to date is print more money, so grabbing 10% of the billions in savings would be very attractive to governments

I sure hope my Aunty and Uncle who moved to Cyprus to avoid paying UK tax lose out financially here.

A bit harsh!

I was going to start a thread on this myself. What horrifies me is the idea that the government can just decide to dip its hand in your pocket and steal your savings. Could this happen in the UK?

Not really. They were hugely supported by our government throughout their lives, and when they got rich enough they decided they didn't want to pay their fair share back any more. So they moved to Cyprus (although still spend a lot of time in he UK). Obviously that's their right to do so if they chose, but I think it is hugely selfish.

Obviously moving to another country is fine, I don't want to live in the UK my whole life, but their entire motivation for leaving the UK (and picking Cyprus) was so that they could get away with paying less tax.

MrC - yes, they can do that at any time - it's just a tax. They can institute one-off taxes any time they like. Not sure if something like that would need a HoC vote here, but they could do it one way or another. Like the "windfall" taxes on utility companies a while back.

Seriously? Holy shit - is there anywhere I can read up on that subject, my googling hasn't revealed much so far?

There are plenty of circumstances that could lead to you not getting any of your money back from the bank, it's just they are incredibly unlikely to ever occur in a basically stable economy.

The Mansion Tax would be a perfect example of this. Paying an arbitrary flat rate tax on the value of assets that you hold and acquired from taxed income. Nothing stopping it at all, even on bank balances, although apparently 'big house' is considered more politically justified than 'x% of your bank balance'.

According to http://www.parliament.uk/about/how/role ... overnment/ taxes need parliamenary approval, so there we go.

Mostly they do - certainly to introduce a new tax this is required. However, a government could pass a finance bill with a provision for a new tax that provides the rate to be set by Statutory Instrument which then doesn't need parliamentary approval. Rare for it to happen though (I can't actually think of a rate set by SI offhand).

Finance / economics is not my strong suit, to put it mildly. Does this mean it's actually rather stupid to be holding savings in the current climate?

No - any UK party trying to invoke a similar tax to cyprus knows that they would immediately become unelectable until the end of time. Its only happening there because it is pushed down from the EU. In any event, there is discussion as to whether it can legally be called a tax - they've only called it that to usurp the deposit protection rules. Also, it's only happening because Germany don't want to be seen to be bailing out Russian Money Launderers - how it has only reached their attention now that this is where all of Cyprus' bank deposits come from is also astounding.

Hmmm, the whole proposal seems completely unjust. Then I remember meeting ex-pats in Cyprus and about their whole attitude and think "Nah...fuck 'em, miserable twats"

OK, but couldn't the Cyprus situation lead to large numbers of people in other countries wanting to withdraw their cash out of pure fear?

Yes, I'm sure savers in Spain and Italy are operating on hair triggers now.

/EDIT

Of course this could be an evil plan to get savers to take their money out to invest / spend it.

Possibly, but if you take the reasoning for it at face value, they shouldn't do as cyprus is fairly unique due to the russians. However in my eyes it is all a pretty ridiculous move - Peston on the BBC news website has a fairly decent report as to why it seems ludicrous. I'm not going ot read the almost certainly retarded speak your brains comments though.

Cheers - I read the Peston piece (took me a while to find it as I assumed you'd gone and done a typo and it should have been Preston).

Stamp Duty?

Not according to FA12.

Yeah, I did wonder if that was the case, but I too couldn't find any that were done by SI. Bloody good thing, too.

NOT TOO BUSY ON FIRST DAY BACK AT WORK UPDATE

The official rate of interest for beneficial loans is set by statutory instrument, which varies the level of tax charge and isn't fixed to any actual interest rate, so Treasury can do what they like with it in theory.

This is an interesting blunt instrument (the savings levy).

I'm generally against this kind of thing, as it can really bugger up the poor. If they could remove the tax on people with small savings, it might be effective in this instance, though, purely because of the amount of laundered Russian money there.

Or, they could just levy it against funds held by foreigns!

But, on the whole, it seems well dodgy.

It’s hugely unfair to everyone aside from the very wealthy, (who have already seen this coming or been tipped off and moved their money).

If there needs to be austerity measures then ok, but some should be on bankers and bond holders and maybe something should be shared by the public, but all of the public so increase on tax or duty on fuel.

The EU have made utter dicks of themselves by allowing this as it makes the so call guarantees on money in accounts in the EU worthless, true they have not broken any rules here , but people’s perception has changed and they will not get that trust back.

OR - they've been geniuses as they knew that Russiaas response would be to give Cyprus a loan so that they could avoid the bailout. Putin looks after his friends.

Apparently the EU (German) request was that it be restricted to accounts over 100K only, but Cyprus themselves changed it to apply across the board.

How do we know that there's lots of laundered money in these banks? Isn't money laundering illegal? Can't we just confiscate the illegal money and use that to bail things out?

Guilty until proven innocent.

This really annoys me actually, it is another example of the "right" thing being punished. People are called irresponsible if they spend all their money on ipods and fags, but the people who have not done such are the ones who foot the bill. This is fundamentally different to paying tax on interest earned or income tax to cover benefits, this is paying tax on money not spent.
Does anyone know how it sits with stocks and bonds, etc? Is it simply "cash" savings accounts?

I guess another viewpoint of this is it is an attack on the banking system. If there is a chance that money in a bank could arbitrarily be removed (and say for example that didn't happen in EU bonds). Where are you going to invest your money?

Russia > Cyprus is a long standing well known tax evasion/money laundering route. My eyebrows are elevated to a heightened state of forehead on the rare occassions that I see that connection (uneccesarily, as it turns out, but y'know).

It's not necessarily laundered money, but there is around £20Bn in Russian private investments...

Cyprus is far more complicated than a simple bailout, as there are deeper political issues circling it, according to my Dad who has been living out there for quite a few years (they moved for health reasons - and are ambivalent over the whole thing as they don't have huge savings anyway, and they have saved more than would be taken by living there, so it's swings and roundabouts really)

Firstly, it is in a very strategic position, providing safe airstrips (that don't exist, honest. That's not a black aircraft, it's... um... a high speed duck) for missions into the middle east. This makes it very useful for Europe/Americans. However, the EU/US aren't that chummy with Cyprus itself as turkey would be a much nicer friend in the region. Add to this, the last president (Comrade Chris) was a Russian educated communist, and so he chummed up with Russia very muchly, spending large amounts of cash on obsolete russian tanks and unusable anti aircraft systems to keep the fiendish Turks at bay. However - Turkey is unlikely to press any further anyway as they want to stay on the good side with EU/US.

Secondly, the Turkish/Greek split is still a very hot topic, and so when the chance came to show solidarity with their spiritual brethren in Greece, Cyprus happily joined in the first rounds of assistance (they had a ~£2Bn budget surplus at this point, just 5 or so years ago) The sad truth is that Cypriots are basically mainly Arabs, with some Greek mixing, that used to live side by side in relative harmony until outside forces used them as a political football. Now split under religious lines, with the Christians fervently proclaiming they are pure Greek, always have been, etc. etc. In much the same way as Falklands are more British than the UK, the Greek Cypriots are more Greek than the Greek.

Thirdly, the recent discovery of oil & gas nearby, which Cyprus & Turkey both claim as theirs, so Cyprus offers extra incentives to Russia in the form of preferential extraction rights in the hope of some 'protection' in terms of having a big diplomatic partner even if under it all Russia is unlikely to actually step in and do anything if it did kick off again.

Against this backdrop, Cypriot banks have thrown themselves at the Russian nouveau-riche as a nice little offshore tax haven, backed up by the political chumminess, and attracted quite a lot of the cash that might otherwise have gone to the traditional banking institutes (Germany, Switzerland, London, etc.)

From what's dripping out now, it sounds like the EU said 'you need to get some of this money from this vast tax haven you are running'. If they only taxed the 100k+ bracket (like EU want), the would have to grab 15% or so. this would mightily annoy the Russians whose money was being grabbed. So Cyprus wants to spread the pain to everyone as this would cut the upper limits to 10% or so, thus 'saving' their pals 33% of what it could have been.

However, the EU has unhelpfully come out to say 'Erm... actually we didn't insist you tax everyone - just the opposite in fact', making the comedically inept Cypriot government face the consequences of trying to keep chummy with the Russians throughout.

Cyprus feels it needs Russia as a friend to back it up against the Turkey issue (even going as far as to getting their main power station accidentally blown up rather than expose Russian involvement into shipping arms to Syria when the UN told everyone not to)
EU/US don't want Russia to have any say in the Mediterranean (for all the strategic & military reasons)
If the result of this is (a) a grab of £2-3Bn of Russian money, (b) Russia withdraws most of its investment from Cyprus (c) Cyprus has to crawl back into the arms of the EU/US hegemony, then this is a strategic win for EU/US.

However, the social repercussions of threatening the normal savers (which EU should have in theory protected) would probably be Cyprus' last 'screw you' maneuver that could easily cripple investor confidence in Spain/Italy/Portugal/Greece/Ireland - the hint of another bailout being needed in any of those countries & you can just watch the banks haemorrhage cash like the worlds about to end.

tl:dr: EU bitch slaps Cyprus for getting too chummy with Russia. Cyprus sticks two fingers up as it spirals down the drain. Hilarity ensues.

The UK has bases in Cyprus. And it is a UK base there that is rumoured to be the source of this:



Which would make sense as presumably it's aimed at agents operating in certain middle eastern states.

The government voted and told the EU where to go.

Not one MP voted for the Levy, good for them. Germany and a few other states think that they can do what they want in the EU

Let’s see what happens now, small economy or not, if they go down other EU members will follow, the effect of this on global finance markets will far exceed the 10 billion they asked for in the first place as well.

Germany may think it’s all powerful in the EU as it holds a lot of the loan markers, these aren’t worth shit if country’s default

Probably a bit late to mention or now, but when they were going to take 6.7% off everyone I texted my brother who is stationed out there with the army.

He said that if they did take the money off him George Osborne had promised to pay them back.

I really disagreed with that, not that I think that your brother or anyone else should pay the levy.

The UK Government should have had the Cyprus government exempt the army, not pay the bill, by doing this the UK tax payer is contributing to the bail out.

I always find it annoying that the government cut money from things to make savings, then can instantly find 200 million for something like this.