Motorists in Cyprus will be given a respite from rising fuel prices, as the government stepped in to lower the tax on petrol by some seven cents a litre, while the period for the reduced VAT on electricity costs is to be extended.
A 6.4 cent tax reduction per litre will be introduced for heating fuel.
Finance Minister Constantinos Petrides made the announcement on Thursday, noting that authorities have decided to slash the consumer tax on petrol to the lowest possible permitted under EU law.
Petrides said that following the decision, Cyprus now has the lowest tax amongst its fellow EU member states.
The announcement followed a meeting convened by Petrides who said that cutting the tax on petrol was done to the maximum extent permitted under EU law, adding that Cyprus now has the lowest tax rates in the EU for those goods, at 48c a litre.
By comparison, the fuel tax in Greece is 60c a litre, where the VAT rate is also higher. Pump prices are above €2.10 a litre in Greece.
Petrides said that the Finance Ministry will be preparing an amendment to update the legal framework regulating taxes on fuel, adding that it will be rushed through parliament under expediated review.
10% price hike by end of month
Thursday’s announcement comes as petrol station owners warned this week that motorists should brace themselves for a 10% increase in prices by the end of the month.
In comments to CyBC radio on Wednesday, the spokesperson of the petrol station owners’ association, Christodoulos Christodoulou, said the pump price would be going up by another 15c this month, as the crude oil prices closed in on $110 in world markets.
“About a month and a half ago, it went down to about $70 per barrel, but once the reports of a potential Russian invasion began circulating, it rose to $90 and then $100, and it’s still on the rise, with no indication of where the limit may be or how long it could last,” said Christodoulou in a CyBC interview.
Soaring fuel prices come as inflation reached its highest in 13 years in January when it recorded a 5% increase (seasonally adjusted), while the war in Ukraine has also begun to fuel an increase in the cost of fuel and essential goods.
Late last year, the Electricity Authority of Cyprus (EAC) took a revenue hit of around €24 mln following a decision to offer a 10% discount on utility bills. The VAT cut was announced last September and was due to have lasted for four months.
As the finance minister said, the government’s decision to lower taxes on fuel and extend the period for the reduced VAT on electricity costs, will have a fiscal cost of €40 mln, while a further €150 mln are earmarked for energy saving schemes for vulnerable groups.