On the 26th of August 2011, the House of Representatives voted as a first package of austerity measures a number of amendments to tax legislation for the purpose of raising revenues and decreasing government spending and for the objective of avoiding entry into the support mechanism.

These changes relate to increasing various taxes, introducing a levy for all companies incorporated in Cyprus, as well as introducing/increasing contributions to pension schemes of employees of the government, local authorities and semi-governmental organisations, and introducting a levy for two years on the salaries and pensions paid to employees of the government, local authorities and semi-governmental organisations.

In the next few months a second and possibly a third package of additional measures is expected which hopefully should concentrate on further reductions in government spending.

The increase in the VAT rate from 15% to 17% is expected to be approved with the second package of measures.

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