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Cyprus Mail: Press Review in English, 99-12-29

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From: The Cyprus Mail at <>

Wednesday, December 29, 1999

‘Mini-crash’ on the Stock Exchange

THE GOVERNMENT’S efforts to secure support for its bill for the taxation of stock market profits and the ‘mini- crash’ at the Stock Exchange dominated yesterday’s front pages.

Phileleftheros said that the government’s tax proposal, combined with the imposition of a one per cent levy on every transaction from next year, had created total confusion and it was questionable whether there would be enough support for these to be passed by the House. The government had caught everyone by surprise with its bill, which envisaged a five per cent tax on profits by individuals and 20-25 per cent for companies. This tax would not be valid only for 1999 as had been initially thought. Minister of Finance Takis Klerides was reluctant to give details about the government’s plans when presenting the bill at the House Finance Committee. The political parties were also reluctant to give away anything during the committee meeting, but deputies from Diko and Disy had been preparing their own proposals, the paper said.

Politis said there was a fifty-fifty chance of the government proposals being passed by the House, noting the possibility that the bill could be amended by the political parties before it was approved. It also reported that the parties were keeping their cards closed ahead of the plenum debate. The paper also quoted the chairman of the House Finance Committee, Markos Kyprianou as saying that the failure to vote through the government’s proposal would pose no problem as there was a law which envisaged a 40 per cent tax on profits.

Simerini said that the "uncertainty and negative climate", created by the plans to tax profits, had sent share prices into freefall. The confusion caused by conflicting statements by the government and the political parties had led many investors to sell their shares, which drove down prices. The government’s plans had failed to convince the political parties which embraced an assortment of positions. Meanwhile, the Association of Investors considered the proposed one per cent levy on every transaction as excessive and proposed that this should be 0.6 per cent.

Alithia said the ‘mini-crash’ at the Stock Exchange had caused serious concern among investors as there was no end to the trend of falling prices. The downward pressure on prices had forced the share price index to below the 700 points mark, closing at 681.10 points - 5.08 per cent down. The optimum level for the share index seemed to be 650 points, although there was a possibility that this would fall to 600 points before prices began to rise again, it said. Despite the fact that stockbrokers claimed, in public, that the fall in prices was caused by the uncertainty surrounding the government’s tax plans, in private, they attribute this to an "obligatory correction" of the market. Share prices were over-inflated, they stressed. After all, the government’s tax intentions had been known since August, but did not affect the market.

Haravghi reported that Cyprus featured in the war scenarios being studied by the US military for the next 10 to 15 years. According to one scenario, prepared by the Carlisle military school in the US and reported in Newsweek, Russia could attempt to take over the oil-producing areas of the former Soviet Union, around the Caspian Sea. In such an event, US forces would react automatically, using southeastern Turkey as its base. Crete and Cyprus would also be used as US bases, as they could not be hit by Russian long-range missiles.

Machi reported that half the residents of the Nicosia district had visited the casualty department of the Nicosia General Hopsital in 1999. Until the end of last week, 112,500 people had visited the casualty ward, compared to 108,000 in the previous year.

© Copyright Cyprus Mail 1999

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