Would the EU’s Depositor Tax be Illegal?

The supreme law of Cyprus is her written constitution and Article 24 (4) states:

“No tax, duty or rate of any kind whatsoever other than customs duties shall be of a destructive or prohibitive nature.”

Given that all bank depositors are to be charged and bailed in ‘at a rate‘ and not just the depositors of the two banks in need of radical balance sheet restructuring, we should argue that even were parliament to pass the proposed depositor tax this could and would be challenged in the Supreme Court.

The only legal way out under the constitution is a combination of a ‘bail in’ for amounts above Euros100,000 held as deposits at the Bank of Cyprus and Laiki Maifin, together with a restructuring of Cyprus’ sovereign debt.

Copy and paste the link to your browser and find the relevant section of the Cyprus constitution:

 

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