Taxation Ethics: Cyprus



Cyprus has been in dire financial straits for quite some time. With each passing day, the island gets more and more desperate to avoid financial collapse and, with each day, the likelihood of the nation doing so steadily declines. The government gets more creative in each attempt to stave off complete financial meltdown. The latest ‘tool’ the government considered using, is a testament to the desperation sinking in.

Most people, especially those in the United States, are not familiar with the term ‘bank levy,’ nor should they be. A bank levy is a tax on the bank’s accounts in order to ‘discourage irrational spending’. In layman’s terms, a bank levy is a tax on the money deposited by the bank’s customers.

If that sounds shocking to you, it should. Cyprus’s own 56-seat parliament denounced the levy proposal as “bank robbery” and even mere discussion of the talks has sent Cypriots to the banks to withdraw their funds. While this move by citizens is hardly surprising, the government’s actions certainly are. Announcing the idea of a bank levy is having disastrous effects on the economy that is being felt in the United States as the stock market is undercut by growing fears of the island nation falling away.

Discussions of options for the financially-frustrated nation are centering on only a few options, none of which will be popular for the citizens. The situation in Cyprus reveals a global phenomenon in both governments and businesses: an inability to admit inadequacy. Governments are taking longer than ever to admit there is a problem and groom their rhetoric accordingly. It is much easier to blame the other party, blame the workers, blame the central banks, blame businesses, and blame other countries for the failings of a country’s financial system when instead it is the system itself that is woefully inadequate.

Few would argue that Cyprus has a darling economy that simply hit a few bumps in the road. The failing economy is the result of structural flaws in the economy. They are attempting to mend broken bones with band-aides. Pumping more money into the economy will not prevent Cyprus from having the same crisis all over again.

Cyprus’s recent actions to attempt a bank levy show that the island nation is no longer considering the most fair, least-painful solution to the crisis. They are seeking the easiest, highest-payoff solution that will doom the future of their economy for decades to come. Other countries would do well to prevent themselves from repeating the mistakes of Cyprus.


By: Aaron Overfors

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