Hopes for VAT zeroing and scenarios for tax breaks

This was also hinted at by the President himself yesterday, but he did not want to prejudge the decisions of today's meeting, which will be attended by the Ministers of Finance and Energy, the Minister of Transport, who is the Deputy Minister of Labor and the Deputy Minister of Social Welfare. “The state has a degree of capability and financial flexibility. “What we are interested in and is something that all countries are definitely facing as a result, unfortunately, of the Russian invasion of Ukraine, is to see how we can help alleviate the problems of vulnerable groups of the population and beyond,” the President said yesterday. .

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The intention of the government to take additional measures, in addition to those that apply to address the accuracy and which are expected to be quoted, was expressed by government spokesman Marios Pelakanos last Tuesday. “With a full sense of responsibility and always on the basis of the financial data of the state, the Government has already adopted but also wants to assure the Cypriot people that it will continue to adopt a series of measures to mitigate the consequences. To this end, the President of the Republic has convened next Friday, at 11 am, at the Presidential Palace, a meeting in the presence of the competent Ministers, in order to study measures to mitigate and/or address the consequences of the new international crisis. “, Were the statements of Pelekanos.

However, the scenarios for the form of the new measures give and take, as of course the proposals from parties, but also the social partners. The latter were even requested by the government itself from the unions SEK, PEO and DEOK and the employers' organizations, while the parties … without special invitation have published in the past few days a series of proposals for curbing inflation and for relieving households. One of the main but also common denominators of all the proposals is the reduction of VAT on basic consumer goods or their zeroing, a fact that raises high expectations in this direction.

Definitely

It should be taken into account, however, that today there will be a decision for a new extension of the reduction of the fuel tax on fuel, which expires at the end of June and the continuation of the reduced VAT of 9% on household electricity, which was also to end at the end of June. For fuel, it is noted that, if the reduction is not renewed, the average price of 95-octane gasoline, which currently stands at 1,645 euros per liter, should increase by another 8.3 cents.

Thoughts on VAT and the amount of the EIO

Some information in the meantime does not rule out that in terms of VAT on electricity it now applies to businesses and not only household consumers, while some scenarios want the reduction not only to be extended but also to grow. In particular, some thoughts are made in order to further reduce the VAT rate to 5%, as is currently the case for vulnerable consumers, a reduction which – for the time being at least – continues until August. & nbsp;

As mentioned, it is estimated that today's meeting will also consider the possibility of reducing VAT on basic products, as requested by parties and social partners, including employers' organizations. In such a case, in such a case, a zero rate for food and other basic goods, which are currently at the reduced rate of 5%, should not be ruled out, unless a new reduced rate below 5% is decided. We remind you that the basic VAT rate is currently 19%, while there is also the reduced rate of 5%, but also 9%.

In addition to the above, the various ministries that were invited to attend today meeting is expected to propose additional measures, not necessarily horizontally. In this context, the possibility of supporting vulnerable groups of the population, which are essentially based on state benefits, will be considered. The day before yesterday, the PEO observed that the amount of the Minimum Guaranteed Income, despite the rising inflation, which is approaching double-digit percentages, remains at the same level since the time it was adopted, in 2014.