Government backs down on civil service bonus tax
The Council of Ministers has tasked Finance Minister Harris Georgiades to reconsider an earlier decision to tax the retirement bonus of civil servants and discuss the matter with stakeholders, government spokesman Nikos Christodoulides said after Tuesday’s Cabinet meeting. Public sector trade unions declared a 24-hour strike on Friday to protest further cuts in salaries and the taxation of their one-off retirement, a fund that only the employer government contributes to.
Georgiades had suggested taxing their bonus in order to keep public spending in check, while a counter proposal included distributing the bonus tax free but over five years.
Christodoulides said that the Cabinet decision has taken into account the need for long-term sustainability of public finances, ensuring the public payroll, the pensions and the state’s ability to support growth and social cohesion.
“Therefore, the Cabinet considers that the decision on taking strike action was hasty and calls on trade unions to respond positively to the invitation of the Cabinet, to discuss the concerns of the Ministry of Finance in order to avoid unnecessary inconvenience and problems that may arise from a decision taken on the basis of a false impression,” he said.
The measures that Minister Georgiades is expected to discuss with trade unions include social pensions, the expansion of the public sector’s contribution to health care and the review of payment of the one-off retirement bonus, while extraordinary cuts to the public servants salaries will not be permanent. The 2015 state budget, presented to the Cabinet on Tuesday, takes into account the fact that the Republic is still in the economic adjustment programme, although there is some potential to reduce reliance on the Troika bailout package.
Christodoulides has said that next year’s budget broadly reflects the correction of the public finances and the need to continue fiscal consolidation, while putting emphasis on the policy priorities relating to the co-financed development projects, as well as policies for social cohesion.