Although the Cyprus Stock Exchange (CSE) has reported a surplus of C£650,000 (US$1.24 million) for the year 1996, there has been an alarming drop in share prices and the volume of trade. Interested parties have thus realized the urgent need for immediate measures to help the CSE become a strong capital market.
In an effort to encourage listing, the Cyprus House of Representatives has unanimously approved a bill on tax incentives to be offered to companies joining the CSE. Among other provisions, the bill offers a 20% tax rate — 5% lower than the current corporate tax — for all public companies listed on the CSE for four years from the date the law is enacted. Furthermore, contrary to current practice, withholding tax will not be deducted at source on dividends payable to foreign investors.
In response, however, the chairman of the Association of Public Companies (Sydek) said that the incentives offered so far could not be considered in any way sufficient or effective. Sydek claims that unnecessary bureaucracy and strict controls imposed by local authorities in Cyprus are hindering the further development of the CSE, and that recently suggested additions or amendments to regulations offer no substantial benefits. To satisfy its members and protect their rights, the Association suggests it should be represented on the CSE council and able to express its members' opinion on relevant stock exchange laws and regulations.
Meanwhile, the recently-formed Union of CSE Stockbrokers seems to be taking a parallel line. It too believes that many problems would be avoided if the Union were represented on the CSE Council. Stockbrokers believe they would be the best qualified body to judge how the market is likely to respond to proposed regulatory or legislative changes.