For a long time, Cyprus has been a favourite destination for Russian capital, aiming to escape taxation, corruption and mismanagement in Russia. Total assets, physical and monetary, are thought to be in the vicinity of $19 billion, and now even they are going to get taxed under the emergency regulations. President Vladimir Putin's spokesperson expressed the view that the levy is 'unjust, unprofessional and dangerous'. Considering the haphazard and panicky state of the situation, Putin would have a very valid point here.
The corporate and taxation rates in Russia are an even 13% - the 12,5% hike may have been a compromise between Brussles and Moscow to prevent complete capital flight from Cyprus.
So, how did we get here?
In 2012, Cypriot banks lost billions as a result of the bailout packages for Greece and Cyprus officially asks the Eurozone for help in dealing with the aftermath.
Towards the end of 2012 and beginning of 2013, a number of appeals go out to Cyprus to cut wages in the public sector and budget expenditures, in order to deal with the rapidly deteriorating situation. In the middle of January, Standard & Poor's lowers the country's rating and declares it a risk to the Eurozone.
Nikos Anastasiadis, elected as Cyprus' new president in February, promises to restore international credibility; in mid-March, Moody's and Fitch also dramatically lower Cyprus' credit rating.