Cyprus imposes 9.9% tax on bank deposits

[greengiraffe]

The point to note is that most of the smart and big money in these troubled nations would have long flee the country given the ease of money flow (lack of restrictions as a result of the union). The beneficiaries of such money are none are than the stronger EU countries such as Germany, Holland and UK. Note that these safer countries have already experienced massive asset inflation. Hence, the residual funds that will flee will no longer be significant but really belong to that of mum and dads. Unfortunately, the innocent guys are always the ones that are punished and hence the latest twist.

Actually 37% of the deposits in Cyprus come from overseas. You can safely assume these are not mom-and-pop depositors. In fact Cyprus is widely viewed as a major money laundering centre for Russian money. Many of the Greek tycoon families, who have historically paid little or no tax in Greece, also park funds in Cyprus. So the tax is another way to hit the dirty money and tax dodgers.

The Cypriot government is now proposing 3 tiers, where the lowest tier pays nothing or at most 3%, and the highest tier pays 15%. So they are really after the dirty money, not your average Cypriot citizen. The dirty money can't easily move to Paris, London, Zurich or Frankfurt because of KYC requirements. Anyway with the capital controls they are stuck - the only practical way to move $10m is to wire it, gold weighs too much and diamonds incur too high a transaction cost. So it looks like Cyprus will be able to part-fund its bailout. The big losers are the money launderers and the tax cheats, but nobody likes them anyway so it's all good.

So like that lagi no worries lah. Ill gotten money to pay for mess - well worth it for good cause.

So it is just another learning experience and noise for a mid term correction. Fantastic for value seekers.

[Thriftville]

Actually 37% of the deposits in Cyprus come from overseas. You can safely assume these are not mom-and-pop depositors. In fact Cyprus is widely viewed as a major money laundering centre for Russian money of dubious origin. So the tax is another way to hit the dirty money.

The Cypriot government is now proposing 3 tiers, where the lowest tier pays nothing or at most 3%, and the highest tier pays 15%. So they are really after the dirty money, not your average Cypriot citizen. The dirty money can't easily move to Paris, London, Zurich or Frankfurt because of KYC requirements. Anyway with the capital controls they are stuck - the only practical way to move $10m is to wire it, gold weighs too much and diamonds incur too high a transaction cost. So it looks like Cyprus will be able to part-fund its bailout. The big losers are the owners of the dirty money, but nobody likes them anyway so it's all good.

dog, any idea why Cryprus is allowed to launder money from Greece?
Since Cryprus is part of EU and should abide to laws set by the union.

[rogerwilco]

http://www.economist.com/blogs/schumpete...6870665|AP

The Cyprus bail-out
Unfair, short-sighted and self-defeating
Mar 16th 2013, 14:54 by A.P.

IT IS not a fudge, but it is still a failure. The euro zone’s bail-out of Cyprus, which was sealed in the early hours of Saturday, did get the bill for creditor countries down from €17 billion to €10 billion, as had been rumoured. But the way it did so was somewhat unexpected.

Almost €6 billion of the savings for taxpayers in euro-zone countries came from losses imposed on depositors in Cyprus’s outsize banks. A one-off 9.9% levy will be imposed on all deposits over the insurance threshold of €100,000 before banks reopen after a bank holiday on Monday. That idea had been in the air for a while, not least because a lot of those uninsured deposits came from outside Cyprus, and from Russia in particular. The politics of saving wealthy Russians with money loaned by thrifty Germans were always going to be tricky.

What had not been anticipated was a 6.75% loss for savers with deposits in Cypriot banks below the insurance ceiling. Cypriots woke up this morning to find bank branches closed to them. By the time they will be able to get at their money, it will be too late. The offer of equity in banks to replace the value of their savings is meant to be a balm but it’s not a choice they would have made. Why this decision was taken is not yet clear. The most plausible explanation is that the Cypriot government itself preferred to spread the pain rather than wipe out non-resident depositors and jeopardise its long-term prospects as an offshore financial centre for Russian and other money.

Whatever the rationale, it is a mistake for three reasons. The first error is to reawaken contagion risk elsewhere in the euro zone. Depositors have come through the financial crisis largely unscathed. Now they have been bailed in, some of them in breach of an explicit promise that they can be sure of getting their money back even if a bank goes belly-up.

Euro-zone leaders will spin the deal as reflecting the unique circumstances surrounding Cyprus, just as they did the Greek debt restructuring last year. But if you were a depositor in a peripheral country that looked like it needed more money from the euro zone, what would your calculation be? That you would never be treated like the people in Cyprus, or that a precedent had been set which reflected the consistent demands of creditor countries for burden-sharing? The chances of big, destabilising movements of money (into cash, if not into other banks) have just shot up.

The second error is one of equity. There is an argument to be made over the principles of bailing in uninsured depositors. And there is a case for hitting everyone in Cypriot banks before any taxpayer in another country. But there is no moral imperative for whacking Cypriot widows and leaving senior bank bondholders untouched, as appears to be the case here; or not imposing any losses on sovereign-debt investors in Cyprus; or protecting depositors in the Greek operations of Cypriot banks, as has also happened. The euro zone may cloak this bail-out in the language of fairness but it is a highly selective treatment. Indeed, the euro zone’s insistence that this is a one-off makes that perfectly plain: with enough foreigners at risk and a small enough country to push around, you get an outcome like Cyprus. (That is one reason why people are now wondering about the implications of this deal for little Latvia, also home to lots of Russian money and itself due to join the euro zone in 2014.)

The final error is strategic. The Cypriot deal has no coherence in the larger context. The euro crisis has been in abeyance for a few months, thanks largely to the readiness of the European Central Bank to intervene to help struggling countries. The ECB’s price for helping countries is to insist they go into a bail-out programme. The political price of going into a programme has just gone up, so the ECB’s safety net looks a little thinner.

The bail-out appears to move Europe further away from the institutional reforms that are needed to resolve the crisis once and for all. Rather than using the European Stability Mechanism to recapitalise banks, and thereby weaken the link between banks and their governments, the euro zone continues to equate bank bail-outs with sovereign bail-outs. As for debt mutualisation, after imposing losses on local depositors, the price of support from the rest of Europe is arguably costlier now than it ever has been.

It is also hard to square this outcome with the ongoing overhaul of finance. The direction of efforts to improve banks’ liquidity position is to encourage them to hold more deposits; the aim of bail-in legislation planned to come into force by 2018 is to make senior debt absorb losses in the event of a bank failure. The logic behind both of these reform initiatives is that bank deposits have two, contradictory properties. They are both sticky, because they are insured; and they are flighty, because they can be pulled instantly. So deposits are a good source of funding provided they never run. The Cyprus bail-out makes this confidence trick harder to pull off.

Other than that, it is a really good deal.

[greengiraffe]

This is the most significant invisible hand, any other things doesnt matter.

http://www.cnbc.com/id/100565542

Gartman on Cyprus: ‘Don’t Mess With Russian Mafia’
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Published: Monday, 18 Mar 2013 | 6:08 PM ET
By: Bruno J. Navarro
Online Producer


Gartman on Cyprus: 'Don't Mess With Russian Mafia'
Monday, 18 Mar 2013 | 5:39 PM ET
The decision to tax Cyprus bank deposits to fund a bailout by the EU was "egregiously bad," Dennis Gartman of The Gartman Letter says.
The decision to tax Cyprus bank deposits to fund a bailout by the EU was "egregiously bad," Dennis Gartman of The Gartman Letter said Monday on CNBC.

"Everybody knows that the vast majority of the deposits in Cyprus are from Russia," he said. "They're Russian government officials, they're Russian businessmen, it's Russian mafia – and you don't mess with the Russian mafia."

On "Fast Money," the editor of The Gartman Letter said that the move would not sit well with a powerful contingent of Cyprus bank account holders.

"People around the world don't kidnap Russians because they know that the Russians will deal with you in a very efficient and very ugly manner," he said.

"I think the decision here was egregiously bad. I think this was lunacy on the part of the European monetary authorities, the banking regulators, or whoever it was responsible for making this decision in Cyprus. They have stepped on Russian toes, and the Russians are not going to be happy about this. Somebody will have to pay for it. I think this is very stupid."

Gartman said that he held long positions in Australian, New Zealand and Canadian dollars. He also said that he was short the yen and the euro, whose prospects appeared poor.

"They've broken trend lines. Things look ugly. I think you're going lower in euro, and I think you're going materially lower over time," he said.

[d.o.g.]

any idea why Cryprus is allowed to launder money from Greece?
Since Cryprus is part of EU and should abide to laws set by the union.

I do not know if Cyprus was laundering Greek money. Apparently Greek shippers are constitutionally exempted from income tax so technically their income was already clean.

For wealthy Russians, Cyprus was a popular place to park their money. Until the Greek fiasco, it was viewed as economically stable and low-tax (10%). And being part of the EU, the money would be safe from the Russian government.

Remember that some of the Russian wealth came from buying national assets, whether heavy industries or resources, at below-market prices. Others accumulated wealth by tapping into the revenue streams of Gazprom, for example. Some call this deal-making, others call it stealing. Either way, what happened at Yukos serves as a grim reminder to always keep some money in a safe place - and a first-class airplane ticket on standby.

[Behappyalways]

Everything You Need to Know About the Cyprus Bank Disaster
http://www.theatlantic.com/business/arch...er/274096/

[a74henry]

High levies on bank deposits ... Savers are punished for leaving money in the bank. How can the country progress by discouraging people to save?

[greengiraffe]

This is an ultimate poker game between Germany, EU and Russian interests. Russia have little choice but to help as an ousted Cyprus from EU will result in Russian interests flushing down the toilet bowl with a runner country, Cyprus.

No worries, as long as there is vested interests, there will be a solution. Fresh injection of Russia money is actually a positive since it represents new fund flows into troubled EU zone.

http://www.cnbc.com/id/100571759

Russia Talks 'Looking Beyond' Loan Extension: Cyprus
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Published: Wednesday, 20 Mar 2013 | 5:31 AM ET
By: Holly Ellyatt
Assistant News Editor, CNBC.com


Play Video

Cyprus Fin Min: We're Hoping for Russian Support
Wednesday, 20 Mar 2013 | 5:19 AM ET
Michael Sarris, Cyprus finance minister, tells CNBC how his first meeting with his Russian counterpart was "very constructive".
Cyprus's finance minister, Michael Sarris, has told CNBC that Russia has been very supportive about the terms of the 2.5 billion euro ($3.2 billion) loan that Cyprus has already received from Russia and that talks were now "looking beyond that," adding to speculation that Russia could come to Cyprus's financial aid.

"We had a very good first meeting, very constructive and very honest discussion. We underscored how difficult the situation is and we will now continue our discussions to find a solution by which we hope we will be getting some support from Russia," Sarris told CNBC in Moscow.
Asked whether this meant an extension to the existing loan, Sarris said: "No, we are looking at things beyond that."

"We don't have any details but we'll continue discussions. We will be here until we get some agreement," Sarris added.

Sarris would not offer any further details as to whether this would include Russian purchases of banking assets in Cyprus, where an estimated 20 percent of all deposits are held by Russian businesses or individuals.

(Read More: How Russia Could Become the Savior of Europe)
Cyprus has already rebuffed Europe's bailout terms. On Tuesday evening its parliament voted overwhelmingly against a European proposal to levy a taxon Cypriot deposits.

(Read More: How Russia Could Take Revenge Over Cyprus Deal)
Sarris arrived in Moscow for talks with Russian officials on Tuesday evening.

[koh_52]

Isn't that robbing of the rich without burdening the government?

There are many ways of robbing the rich...World class champion is Sickapore, best learn for papy impose all the taxes craps. But easiest is to rob the poor pay the rich, it happen here.

Printing money and high inflation are the other easy ways to rob the citizen.

Moving forwards, to tackle budget deficit look like the easier way is to inflate the way out, this is what EU and Japan doing now.

Inflationary polices are more popular, people like to see their assets prices rise.
Talking about inflation, there are 3 type of inflation.
1. Commodities inflation
2. Wages inflation
3. Thru debasing currencies.

Oops, out of topic liao..stop here.

[pianist]

Isn't that robbing of the rich without burdening the government?

There are many ways of robbing the rich...World class champion is Sickapore, best learn for papy impose all the taxes craps. But easiest is to rob the poor pay the rich, it happen here.

Printing money and high inflation are the other easy ways to rob the citizen.

Moving forwards, to tackle budget deficit look like the easier way is to inflate the way out, this is what EU and Japan doing now.

Inflationary polices are more popular, people like to see their assets prices rise.
Talking about inflation, there are 3 type of inflation.
1. Commodities inflation
2. Wages inflation
3. Thru debasing currencies.

Oops, out of topic liao..stop here.

impressed by yr economic knowledge....can see a very learned individual here.