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Next Previous The measures proposed by the CCCI due to the war HOME • INSIDER • CYPRUS • The measures proposed by the CCCI due to the war
& nbsp & nbspInsider & nbsp; & nbsp ;
A letter to the President of the Republic & nbsp; regarding the effects of the war in Ukraine on the Cypriot economy was sent yesterday by the President of the CCCI, Christodoulos Agastiniotis.
In his letter, which he communicates to the Minister of Finance Konstantinos Petridis, the president of the CCCI describes the situation in Cyprus as it is today mainly due to the war in Ukraine but also the ongoing pandemic of the coronavirus and submits a series of suggestions of the Chamber so general. as well as aimed at dealing with the effects that arise in some sectors of the economy.
This is the letter of the CCCI: & nbsp;
“After the start of the war in Ukraine and the additional chain increases that occurred in the prices of fuel, electricity, shortages in the supply of several products used in the food chain (cereals for both human and livestock use) which with the in turn trigger large increases in their prices and consequently in the prices of cereal-based products, inflation will be the main problem of the next two years, with a very serious risk of catalytically affecting the growth rates and the Cypriot economy.
In addition to the continuous increases recorded in fuels and cereals, similar increases are recorded in many other products such as iron, aluminum, wood, chemicals, imported raw materials and final consumer products which push inflation to even higher levels.
Serious problems and increases are also recorded in the transport sector as all shipping companies increase their fares due to the increase in fuel and increased premiums that are required to pay for the transport of products especially from war zones. & nbsp; Increases are also imposed due to the limited transport capacity that exists worldwide due to the decision of shipping companies to withdraw old technology ships from their voyages, in order to be replaced by newer generation, & nbsp; more environmentally friendly ships.
The major upheavals in the supply chain, which began with the pandemic and have intensified due to the war in Ukraine and sanctions imposed on Russia, are fueling further increases in all products, causing severe delays in deliveries and growing shortages. & nbsp; These upheavals also significantly affect the imported food sector. & nbsp; And there are concerns that these upheavals will continue due to the reversal of the pandemic in countries such as China that continue to de-tune the various factories and cargo ports. & nbsp; & nbsp;
The CCCI estimates that based on current data these problems will intensify in the near future, while if the war in Ukraine does not end soon and the spring grain harvest in Russia and Ukraine is lost, the shortages and consequently the increases prices on these products will be even sharper. There is widespread concern that shortages and price increases for these products will increase further due to expected shortages of fertilizers and pesticides used in the production of cereals, which come mainly from Russia and Ukraine. >
Serious upheavals are also expected in the professional services sector in so far as they relate to Russian nationals or companies, due to the sanctions imposed, which in practice hinder or further hinder any business activity with this country.
To all this must be added the problems that Tourism and its related economic activities will face in 2022, due to the negative developments with the reduced arrivals of tourists from the two warring countries. The situation as it is shaped by flight restrictions and the exchange rate of the ruble against the euro, will certainly greatly affect the purchasing power of Russian tourists who will choose cheaper destinations or will greatly reduce their travel.
IMPACTS ON THE CYPRUS ECONOMY
Based on the above, it is clear that the main problems that Cyprus is expected to face in the near future, possibly until 2023, are the following:
(α) & nbsp; & nbsp; & nbsp; High inflation while maintaining high prices on several products and services for a long time.
(b) & nbsp; & nbsp; & nbsp; High energy costs (fuel and electricity) for both businesses and households.
(c) & nbsp; & nbsp; & nbsp; Limited quantities of cereals for human and livestock use at high prices.
(d) & nbsp; & nbsp; & nbsp; Shortages at least in the medium term, in several raw materials, intermediates and final products, combined with high prices that are expected to affect the smooth operation of several companies and the competitiveness of their products.
(e) & nbsp; & nbsp ; & nbsp; Declining sales due to inflation that will cause liquidity problems for many businesses as more money will be needed to purchase new stock replacement supplies.
MEASURES TO BE TAKEN
In view of these data, practical and targeted measures of both short-term and long-term nature should be announced immediately, targeting mainly:
(a) & nbsp; & nbsp; & nbsp; To alleviate the increased costs that citizens and businesses are required to pay, especially in the areas of fuel and energy (electricity) for as long as high fuel prices are observed. & nbsp; In this context, the possibility of a temporary suspension of the mandatory use of biofuels in refined products can be considered in order to achieve a significant reduction in fuel prices. & nbsp;
(b) & nbsp; & nbsp; & nbsp; Ensuring sufficient quantities of cereals, mainly for livestock purposes but also for human consumption, to ensure the survival of the animals and the continuous supply of the market with meat products.
(c) & nbsp; & nbsp; & nbsp; Subsidizing part of the increased prices of cereals for livestock purposes in order to keep the prices of locally produced agricultural products low.
(d) & nbsp; & nbsp; & nbsp; Enhancing the resilience and independence of the economy in matters of energy self-sufficiency with emphasis on investments in the sectors of RES, energy savings and the arrival of VAT. To this end, it is necessary to accelerate the process of completing the system of operation of the competitive electricity market and the implementation of investments in networks and substations, the absence of which delays, thus suspending the substantial implementation of large RES developments in the competitive electricity market.
& nbsp; & nbsp; & nbsp; The state urgently needs to include in the grant plan for the installation of photovoltaic systems and large companies that are also affected by very high energy costs such as hotels, industries and commercial companies. & nbsp; It should also be possible for the photovoltaic panels to be installed in another (not necessarily adjacent) piece/s and to serve the premises of the company, as most companies do not have free space within their piece e.g. such as the virtual net metering method. & nbsp;
(e) & nbsp; & nbsp; & nbsp; Enhancing the country's self-sufficiency in a number of products that are considered strategic for the survival of citizens and the smooth operation of our industries in future similar situations, such as food and other industrial products. & nbsp; Particular emphasis should be placed on the planned strengthening and support of the primary sector (livestock sector) in order to invest significant funds in modern facilities that will ensure in the long run increased food adequacy in the country. & nbsp;
(f ) & nbsp; & nbsp; & nbsp; Incentives for the creation of larger storage spaces and silos of cereals and cold stores that meet the necessary food storage conditions, to increase the country's storage capacity in food. & nbsp;
For the payment of these allowances the State must request, together with the other Member States, the creation of a Special Fund with EU money which will be given to the states to support households and businesses.
At the same time, the State should take advantage of the new EU decision to extend the period of implementation of the Stability Pact after 2023, which allows fiscal easing in order to support businesses and households. Given the additional problems that will inevitably arise from the effects of the war in Ukraine and the sanctions imposed on Russia by the West, it should be taken for granted that in 2022 and 2023 there will be & nbsp; the necessary fiscal easing to support businesses and households. & nbsp; The view of the CCCI is that as things develop the basic measures that should be taken to deal with the effects of this new crisis, will be, as in the case of the pandemic, mainly of a fiscal nature. & nbsp;
In order to effectively support households and businesses, the CCCI proposes the following measures:
A. & nbsp; & nbsp; & nbsp; Horizontal Measures
(i) & nbsp; & nbsp; & nbsp; Do not raise the issue of the minimum wage and the increase of the index for 2022 because it will increase inflation even more. & nbsp;
(ii) & nbsp; & nbsp; & nbsp; Time extension of the State Guarantee Scheme to ensure Liquidity while deleting the term for “non-layoffs” in order to support the additional needs of companies in liquidity. & nbsp; From information we have obtained one of the reasons that there was no effective use of the Plan is due to the term “non-layoffs”
It is also proposed to increase the state guarantees to 90% from 70% as was done in most European countries as well as the abolition of the restrictive measures imposed by the Ministry of Finance on the reduction of turnover (30% for SMEs and 50% for large businesses). & nbsp;
(iii) & nbsp; & nbsp; Utilization of the Council Directive (EU 2022/542) dated 5.4.22 which allows Member States to impose reduced VAT rates of up to zero on several product categories to reduce costs to businesses and citizens.
< p>(iv) & nbsp; & nbsp; & nbsp; Seek approval from the CBC and the European Central Bank to suspend installments in a similar manner/method at the outbreak of the Pandemic.
(v) & nbsp; & nbsp; & nbsp; Reduce additional energy levies and taxes as long as the inflation crisis continues to reduce prices.
(vi) & nbsp; & nbsp; Facilitations in the payment of taxes, VAT and contributions to the State by companies that are severely affected by high energy prices or have losses in a significant share of their sales, as our relevant letter dated 15.4.22
(vii) & nbsp; & nbsp; & nbsp; Employment of Ukrainian Refugees and implementation of the legislative proposal adopted by the EU on the “Cohesion Action for Refugees in Europe” (CARE). & nbsp;
(viii) & nbsp; & nbsp; & nbsp; Decision at European level to reduce import duties from third countries on a number of products that are considered essential for the smooth supply of the market (fuels, raw materials, food) in order to keep their retail prices at a lower level. & nbsp;
(ix) & nbsp; & nbsp; & nbsp; General abolition of import duties and transport costs, which is known to have increased almost tenfold compared to the past, especially from Eastern countries.
B. & nbsp; & nbsp; & nbsp; Sectoral measures
B.1 & nbsp; & nbsp; & nbsp; Agriculture
(i) & nbsp; & nbsp; & nbsp; Strengthening farmers to deal with rising feed prices. The aid may cover the full amount paid by the importers of the products in question beyond a fixed feed purchase price, or a per capita subsidy provided that they do not further increase the selling prices of their products for as long as this sponsorship is paid to them.
(ii) & nbsp; & nbsp; & nbsp; A similar incentive can be given to fish farmers to ensure that the market is supplied with food.
(iii) & nbsp; & nbsp; & nbsp; Partial subsidy to farmers to cover increased costs of purchasing fertilizers and pesticides.
(iv) & nbsp; & nbsp; & nbsp; Financial tax incentives for the development of new agricultural investments that will increase domestic food production and export potential. & nbsp;
B.2 & nbsp; & nbsp; & nbsp; Wholesale Retail
(i) & nbsp; & nbsp; & nbsp; Wholesale and retail trade are considered major consumers of energy in heating, cooling 24 hours, 7 days a week. & nbsp; Based on this, the criterion of 3% energy cost in production value is largely met, so that it can be recognized as a high energy sector and included in the temporary state aid framework for high energy costs in order to transfer the benefit to retail selling prices of products.
(ii) & nbsp; & nbsp; & nbsp; Concession of a certain amount per means of transport (commercial vehicles, trucks and taxis) and for a specific period of time to cover part of the increased cost of fuel. & nbsp; This period is valid for as long as the international purchase price of the fuel exceeds an amount to be determined.
(iii) & nbsp; & nbsp; & nbsp; In the food sector in particular, and in view of the long-term risk of deficiencies, it is proposed to avoid unnecessary barriers to food handling and to demonstrate the necessary flexibility in labeling requirements when some may need to be , without compromising food safety and proper consumer information.
(iv) & nbsp; & nbsp; & nbsp; The issue of staff shortages continues to exist in Retail and Horeca companies and the solutions so far are insufficient “Businesses want to hire staff and not lay off”. & nbsp; Examine applications for staff recruitment from third countries. & nbsp; Expanding the areas where students from third countries can work is a good initiative but it does not solve the problem because it does not increase their number.
(v) & nbsp; & nbsp; & nbsp; The imposition of a “price cap” on products must be done with extreme caution and sparingly, only in exceptional cases where there is a real tendency for scandal. & nbsp; The “ceiling” should be imposed on the profit margin and not on the retail selling price. & nbsp;
B.3 & nbsp; & nbsp; & nbsp; Industry – Exports
(i) & nbsp; & nbsp; & nbsp; Support for those export companies that trade with war-torn countries, Russia, Ukraine and Belarus.
(ii) & nbsp; & nbsp; & vbsp; The vast majority of Industries have energy costs over 3%, so the same suggestion applies as point B.2 (i)
(iii) & nbsp; & nbsp; & nbsp; Creating a Grant Plan for the installation of energy storage systems from RES to suppliers that will enter the competitive market so that they can offer cheaper electricity on a 24-hour basis.
(iv) & nbsp; & nbsp; & nbsp; Implement support plans to boost export activity (participate in fairs but with a bigger budget), cover travel expenses to find customers as well as cover the increased costs for digital advertising – digital marketing.
(v) & nbsp; & nbsp; & nbsp; Reduction of the cost of imports of raw materials and exports of domestically produced products by implementing an extraordinary plan of partial subsidy of transport costs (containers and air transport) for a period of at least 3 months.
(vi) & nbsp; & nbsp; & nbsp; Support for employment in industry with programs similar to employment support during the coronavirus period. & nbsp;
(vii) & nbsp; & nbsp; & nbsp; The & nbsp; staff shortage continues to plague industry. Industries want to have competent staff & nbsp; from third countries & nbsp; in which they invest to make it a permanent solution, not a temporary one like asylum seekers and students.
(viii) & nbsp; & nbsp; & nbsp; Adopt a policy such as the documented effects of the war on the fulfillment of contractual obligations to the state e.g. rapid cost increases, delays in the receipt of goods and materials, are immediately taken into account for changing the terms of the contracts. & nbsp; A similar policy has been adopted due to the effects of the pandemic.
B.4 & nbsp; & nbsp; & nbsp; Construction Sector
(i) & nbsp; & nbsp; Frequent revisions of prices to various materials to reflect current prices and not cause damage to contractors.
(ii) & nbsp; & nbsp; & nbsp; To enable the extension of project deadlines for up to 8 months due to the inability of many suppliers to provide sufficient quantities of materials to meet the needs but also their inability to provide prices and offers for building materials on a long-term basis. >
(iii) & nbsp; & nbsp; & nbsp; Large construction projects using heavy vehicles with high fuel consumption should provide some relief to fuel prices.
(iv) & nbsp; & nbsp; & nbsp; Modernization of public procurement (specifically public works). The existing contracts made by the public with private companies are outdated, unprofitable to the individual, their management becomes more difficult and against the parties and especially in the current situation the contract works against the individual who can not be protected in any way./p>
(v) & nbsp; & nbsp; & nbsp; Implementation of Sector Support Measures (based on previous pending proposals):
● Abolition of capital gains taxation for a period of time, e.g. three years, for those who proceed with the purchase of real estate until the end of 2022. & nbsp;
. Exemption of the entire or corresponding Tax resulting from the sale of real estate, meaning that all or part of the sale price is reinvested in the purchase of another real estate. This measure is valid until 2025.
● & nbsp; Extension of transfer period of existing tax losses from 5 to 10 years.
● Possibility of VAT refund on properties used for rent. & nbsp; Have the right to VAT refund to buyers provided that VAT will be levied on the rent as an Option to Tax. & nbsp; We recommend that this apply to all residential buildings regardless of the type of tenant.
vi. & nbsp; & nbsp; & nbsp; In order to keep rents at affordable levels:
(a) it is proposed to give incentives to young couples and young professionals to buy apartments instead of choosing the rental solution and & nbsp;
(b) to give similar incentives to institutional/private investors to buy real estate with the commitment to rent them for example for a period of at least 10 years, in order to increase the supply of real estate, an action that will lead to a reduction in rents.
The existing Plan presupposes the existence of a 100% rate for the pieces that will be included in it. It is requested that the incentive be extended to pieces with lower rates (80 – 90%).
B.5 & nbsp; & nbsp; & nbsp; Tourism
(i) & nbsp; & nbsp; & nbsp; Put hotel electricity on the industrial tariff
(ii) & nbsp; & nbsp; & nbsp; The request for employment of foreign staff from third countries remains.
(iii) & nbsp; & nbsp; & nbsp; Reduce the cost of the tour package by reducing VAT for tourism businesses from 9% to 5% and reducing airport charges.
(iv) & nbsp; & nbsp; & nbsp; Product Differentiation Through Targeted Market Action – Great Prospects for the Israeli Market
(v) & nbsp; & nbsp; & nbsp; Approaching new markets and/or increasing the tourist flow from existing ones that present prospects, by enhancing the visibility beyond the internet, by participating in exhibitions, organizing road shows, organizing fam trips and hosting in Cyprus foreign travel organizers and tourist journalists , as well as product differentiation with targeted actions depending on the market.
(vi) & nbsp; & nbsp; & nbsp; Exemption of car rental companies from the burden of registration licenses for 2023 & nbsp;
B.6 & nbsp; & nbsp; & nbsp; Desired Services for further development
Refund or exemption from VAT for capital expenditures in desired areas where there is a prospect and we aim to further develop such as Education (Universities, Schools, etc.), Medical activities , Research etc. This measure will significantly help in the development of new as well as in the expansion/upgrade of existing desired activities as it will cover the construction of new and expansion of existing buildings, purchase of new and upgrade/modernization of equipment. Today, VAT of 19% remains a cost to the above organizations as customers are not charged VAT, so that offset is made, resulting in a significant and deterrent increase in costs. “
