The new measures to combat rising prices—and in particular the extension of the zero VAT rate to basic goods—can provide additional relief to households, though they do not, on their own, constitute a solution to rising prices. This was the main conclusion of the discussion on the “Alpha News” program, featuring the Secretary of the Pancyprian Retail Trade Association, Marios Antoniou, and the President of the Cyprus Consumers’ Association, Marios Drousiotis, commenting on the measures totaling €70 million.
Marios Antoniou stated that the supermarket sector welcomes any intervention that directly benefits consumers, noting that the zero VAT rate can be helpful, even if the savings on certain products will be limited. “As an association and as the supermarket sector, we welcome and support any measure that brings direct benefits to consumers,” he said. As he explained, in the case of products such as milk and bread, where the VAT rate was 5%, the reduction to zero translates to savings of a few cents, while the benefit is significantly greater for products that would otherwise be subject to a 19% VAT rate.
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At the same time, the Secretary of PASYLE emphasized that price increases cannot be attributed to a single factor. The costs of raw materials, production, energy, and labor all influence the final price, and, as he noted, suppliers have already requested price increases. He clarified, however, that “these requests do not automatically mean a price increase on products,” as negotiations with supermarkets must take place first. He also made special mention of the intense competition in the sector, as well as private-label products, which, he said, act as additional pressure to keep prices in check. “They’re cheaper, they’re every bit as good as brand-name products, and they’re of equal quality,” he said, noting that their presence in consumers’ shopping carts also puts pressure on brand-name products to maintain lower prices.
Mr. Antoniou also emphasized the need for the relevant ministry to provide immediate clarification on the exact range of products that will be subject to the zero tax rate. As he noted, the industry is waiting for clarification, for example, on exactly what will be covered by the term “milk,” as well as which categories of coffee will be included, such as coffee in capsules. These details, as he explained, are necessary so that businesses can properly implement the measures on store shelves. At the same time, he pointed out that essential goods, such as baby diapers, could even be considered for permanent inclusion in a lower VAT bracket, so that they do not revert to the 19% rate once the emergency measures expire.
From the consumers’ perspective, Marios Drousiotis welcomed any relief, though he raised questions about the actual magnitude of the benefit in some of the measures. Specifically regarding heating oil, he argued that the projected reduction is limited compared to the sharp price increase since March, calling for more substantial intervention on the VAT front. He also raised the issue of whether the relief measures actually reach consumers, as well as who is ultimately covered by the subsidies and special rates. “Any help is welcome,” he said, insisting, however, that it is necessary to examine whether the funds are being channeled in a targeted manner and are having a real impact.
For the retail sector, the key issue now is to quickly clarify how the measures will be implemented, while for consumers, the key question remains whether government support will translate into a substantial and measurable reduction in daily living costs.
