VAT cut on electricity bills in limbo

A bill approved by opposition parties to cut VAT on electricity bills indefinitely from 19% to 9% across the board is in limbo after MPs rejected President Nicos Anastasiades veto.

Parliament, including ruling DISY’s MPs, unanimously rejected Anastasiades’ rebuttal of a bill passed by opposition parties last year.

DISY said it rejected the veto, not because it disagreed with the issue’s essence but for constitutional reasons.

DISY MP Harris Georgiades said the party did not change its position but feels the House has the power to intervene on the state’s tax policy in contrast to the President’s claims.

President Anastasiades argued the bill violated the separation of powers, insisting that the House does not have the right to intervene on the state’s tax policy.

The spat broke out over the government’s objection to discount VAT on bills permanently, arguing that it would have a huge impact on state finances.

The government will lose an estimated €75 mln in annual revenue if VAT is cut to 9% permanently.

Georgiades argued that the discussion must be done using political arguments and not claims that disputed parliament’s power to raise or reduce taxes.

The government had approved a decree reducing VAT on household bills to 5% for vulnerable groups and 9% for the rest, for six and three months respectively, starting November 1.

Finance Minister Constantinos Petrides told the House Finance Committee the government had rolled out more relief measures than other countries with bigger hikes in the price of electricity.

He urged MPs to avoid proposals that were not targeted, which clashed with EU guidelines and put public finances at risk, creating a long-term loss of revenue.

With the plenum’s rejection of the President’s veto, the bill finds its way back to the Presidential Palace, where Anastasiades can concede or refer it to the Supreme Court.