On Thursday, the House of Representatives plenary session voted in favor of the bill to reduce the excise tax on heating fuels. The measure will take effect on October 23, rather than November 1 as originally provided for in the bill. During the debate in the plenary session, proposals were made for further measures to ease the burden of high prices on citizens, criticism was voiced regarding the government’s budget surplus, while some parties welcomed the fact that “sensible” measures are being taken amid an unstable geopolitical landscape.
The decision to expedite the measure’s implementation starting at midnight tonight followed a unanimous decision by the Finance Committee and provides for a reduction in the excise tax on heating fuelby 6.39 cents per liter, including VAT. The reduction will remain in effect until April 30, 2027.
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Specifically, the bill amends the Excise Tax Law, so that temporarily reduced excise tax rates are applied to products in specific classes of heating fuels. The reduction applies to products in classes 7, 9, 11, and 13 of the First Annex to the legislation.
The tax relief amounts to 5.373 cents per liter excluding VAT and 6.39 cents per liter including VAT, with the fiscal cost of implementing the measure amounting to approximately €5.2 million.
According to the Finance Committee’s report, the prolonged uncertainty in international markets, combined with the expected increase in demand for energy products during the winter months, is putting additional pressure on household heating costs. Consequently, measures are being taken to mitigate the impact of higher fuel prices and support consumers ahead of the winter season.
The Commission recalls that, in its briefing to the Eurogroup dated March 18, noted that to address the situation, short-term measures to support households could be considered—measures that are targeted, temporary in nature, costed in the budget, and should not encourage an unnecessary increase in fuel demand.
During the debate, AKEL MP Andreas Pasiourtides said that the Government and the Ministry of Finance were right to adopt the view of both AKEL and other parties, stating that reducing the excise tax is a necessary measure to provide relief to households. He reiterated AKEL’s position on initiating a discussion regarding a tax exemption and the elimination of double taxation.
He noted that these measures do not require much effort because the arguments and justification already exist, and at the same time, he recalled the other measures proposed by his party.
Odysseas Michaelides, leader of Almas, said that fuel prices would drop from 1,650 euros per metric ton to 1,600, noting that in March they had been at 950. He pointed out a contradiction in the government’s stance, noting that it had requested a derogation from the European Commission for an additional 20 euros per metric ton on heating oil but is not doing the same for . He said that Sweden achieved a reduction to 14 cents through a derogation from the European Commission, noting that the government decided on a derogation of only two cents and should explain why thisderogation.
DIKO MP Chrysis Pantelidis said that during the current administration, there has been a reduction in the tax on heating oil, and the reduced rate on, while we are also experiencing a period of zero VAT on a range of products and on electricity. He said that it must be acknowledged that the Cypriot economy—and others in the EU—are not going through a typical period with major crises; rather, we are in a state of constant crisis.
ELAM MP Marios Pelekanos said that the government has recently taken both broad-based and targeted measures and welcomed the Ministry of Finance’s position on seeking an exemption for further reductions. He said that we are indeed going through a period of great uncertainty and that “prudent” management is certainly necessary because we do not know whether conditions will improve or worsen. However, she said that when public finances allow, we must insist on taking further measures for vulnerable groups in particular.
DISY MP Savia Orfanidou said that this is a step in the right direction and has a positive impact on easing the burden on citizens. She noted, however, that the measures do not fully address the problem identified by DISY—namely, that we have shifted from the challenges of unemployment to other challenges related to theand rising prices. The government, she said, should adapt its policies to address these challenges. Ms. Orfanidou referred to the need for a holistic approach involving structural measures and development, as well as the reallocation of existing resources to the segments of the population most severely affected.
AKEL Secretary-General Stefanos Stefanou said that we should not simply accept the argument that we have the fifth-cheapest fuel and cite statistics, but we must also keep in mind how life is organizedin Cyprus—the fact that every household needs at least two vehicles and that parents and grandparents are becoming drivers to transport children and grandchildren to tutoring centers and activities. He noted that other EU countries have more options and also cited a study by the Audit Office that revealed that, in addition to inadequate public transportation, the cost of public transportation is higher than that of traveling by car.
Mr. Stefanos said that his party agrees with the reallocation of existing resources but also calls for an increase in those resources in two ways: through the return of a portion of the state’s increased revenue and through social policies and redistributionfrom those who are amassing wealth due to high prices, their dominant market position, and oligopolies.
Yiannis Laouris, a member of parliament for Direct Democracy, said that permanent solutions are needed and described the taxation of energy—which should be a basic necessity—as absurd. He said his party would soon submit five legislative proposals to that effect. He also noted that it is absurd for the state to collect taxes on a basic necessity and then, as it sees fit—in his words—to hand out relief as charity at short intervals.
DIKO MP Adamos Aspris said that we are experiencing the consequences of a global crisis and that the state, to the best of its ability, is responding to provide relief to citizens. Responding to proposals from political parties, he said that limits must be set and wondered what would happen the next day if the government were to spend its surpluses or eliminate taxes, citing the example of Spain. He also said that it is right for the state to provide support in a sensible and careful manner.
DIKO MP Christiana Erotokritou pointed out that we have some of the lowest taxes in the EU on transportation and heating fuels, and that it is right to reduce them now because the world is currently.
She also said it is important for the public to know that the legislation takes effect immediately at midnight and not on November 1, as was the case in the original bill. She also noted that there is no measure to offset the costs resulting from the major geopolitical crisis, but the government is doing everything it can within its fiscal capabilities. Ms. Erotokritou said that a response is also expected from the European Commission regarding a derogation to further reduce the unbearable costs. She also noted that she has explained many times why reducing VAT to zero is prohibited, because ultimately “we will end up passing the bill on to Cypriot citizens.”
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