Maintaining inflationary pressures leads the government to decide to renew the existing regime of reductions in fuel taxation and VAT on electricity consumption. Excise duty will remain at the lowest levels permitted by Community law and VAT on electricity consumption will be maintained at 9%, from 19%, with vulnerable consumers being charged an even lower VAT, at 5%.
The Minister of Finance, Konstantinos Petridis, speaking on the noon news program of “Antenna” television, confirmed the extension of the relief measures from the increased energy costs. Similar measures are being promoted in all European countries as the surge in energy prices puts a heavy burden on households and businesses.
Mr. Petridis added that in addition to these two tax measures, the livestock sector has been supported with an amount of 26 million euros (to absorb the increased cost of feed) and a significant part of the employees receive ATA.
The Minister of Finance did not specify the duration of the reduction of the reduced tax, clarified that the Cypriot measures are horizontal and predicted that energy prices will remain high due to the political transition to the green transition (green tax reform is essentially an increase in taxation in fossil fuels) and the war in Ukraine ..
“It will not be easy in the coming years,” said Mr. Petridis. “Europe has entered a period of great inflation. Inflation is now taking on structural features and will stay with us for a long time, both because of the war and sanctions in Russia and because of green growth. “No country can kill inflation at birth, what we are trying to do is with the stocks we have to mitigate the impact on vulnerable groups,” he said.
The Consumer Price Index rose in April at a rate of 8.8%. The data confirm what the real economy is feeling, the big increases in energy. In particular, the largest changes in the economic categories compared to April 2021 were recorded in Electricity with a percentage of 39%, in Petroleum with a percentage of 32% and in Agricultural Products with a percentage of 18.3%. Compared to the previous month, the biggest change was in Electricity with 16.4%.
The acceleration of inflation in the eurozone after the Russian invasion of Ukraine and its formation at 7.5% in April is expected to lead to the acceleration of the decision to increase interest rates. Even ECB officials – such as key economist Philip Lane – who advocated a loose monetary policy and predicted a return to inflation at 2%, now see a need to raise interest rates.