Petrides warns parties not to follow German VAT request

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Cyprus Finance Minister Constantinos Petrides has warned opposition parties not to draw comparisons between Germany’s EU request for a VAT exemption on a new consumer levy on energy produced by gas and their proposals on lifting VAT on bills.

In a written statement, Petrides argued that the two situations were not comparable and that the opposition should not try to make ‘any noise’ on the matter.

The finance minister notes that the request from his German counterpart concerns the support of natural gas importers following the cost increase.

He further argued that the Cypriot government has not imposed any additional fees or other taxation on consumers but has also taken a host of measures to safeguard the disposable income of households.

Petrides gave as an example the VAT reduction from 19% to 9% for all households and 19% to 5% for vulnerable households, ending in August.

“I hope the noise from opposition politicians will not push the government to impose new fees without VAT to support natural gas importers we do not have”.

He also said Cyprus maintains a very low VAT rate and lower fuel consumption taxes compared to Germany and other EU countries.

“Unlike other European countries, the government does not intend to impose additional taxes or fees on consumers”.

“Our policies during this difficult period are aimed at supporting society, with a priority for our vulnerable fellow citizens, at a budgetary cost of over €350 mln to date”.

President Nicos Anastasiades refused to sign off on parliament’s two bills passed by the House relating to VAT on electricity and fuel, claiming they were unconstitutional.

One of the bills, tabled by the main opposition AKEL, provided zero VAT on fuel products until the end of the year. The government estimated a loss to state coffers of around €30 mln.

The second bill, sponsored by centrist parties DIKO and DIPA, cut VAT levied on electricity invoices until the end of the year. The loss in state revenues from this was estimated at €45 mln.

The President argued the legislature had no authority to intervene in the state’s fiscal policy.

Parliament doubled down on the issue and will now go to the Supreme Court.

Germany has decided to impose a new tax on all natural gas consumers.

It is estimated this fee will be between 1.5 and 5 cents per kilowatt hour for every consumer.

In addition, the German government is aiming to impose another tax on energy storage.

The above fees are intended to assist natural gas importers so that they can cope with the excessively high prices of natural gas they import from countries other than Russia.

Under EU law concerning VAT on energy products, the levy is considered a component of the overall gas price, effectively meaning it is mandatory, so Germany needs to ask for Brussels’ permission to waive it.