Fuel tax freeze to stay until end-June

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President Nikos Christodoulides has decided to keep a state subsidy on fuel prices at the pumps unchanged, despite an earlier decision to halve it in May that would have pushed prices up by four cents a litre.

As announced on Wednesday, the President signed the law extending the freeze on consumption tax on fuels that would have ended on Friday, despite earlier reservations due to a stability in crude oil prices.

In April, the government had decided to continue subsidising pump prices by extending a reduction on consumption tax until the end of June, but halving the amount of the subsidy.

The government’s intentions brought about the reaction of the House, that unanimously passed an amendment to extend the freeze in its current form.

As reported by the Presidential Palace, the President had consulted Attorney General George Savvides on the matter, but decided to back down so as not to upset consumers.

In a statement, the head of the President’s press office, Victoras Papadopoulos, said that had Christodoulides decided to refer the MPs’ tweaking of the government’s proposal to the Supreme Court, the legislation would have lingered in courtrooms for weeks.

The Christodoulides administration had argued that keeping the subsidy in its current form, is not justified as petrol prices have reached their lowest ebb since the record highs in July last year.

The government had argued in a note to parliament that there is an international stabilisation in the price of petrol and a slight drop in the price of diesel and heating oil.

Cost of living

The reduced rates were initially introduced in March last year by the DISY-backed Anastasiades administration to alleviate the cost-of-living crisis, driven by the war in Ukraine and sanctions on invading Russia.

It was initially valid until June 2022, but extended, with a reduction of 7 cents per litre on petrol, 8.3 cents for diesel and 6.4 cents for heating oil.

Had the government’s decision been applied, the subsidy would be reduced to 4.16 cents per litre for petrol and diesel and 3.19 cents for heating oil.

The government decided to halve the subsidy, as fuel prices reached their lowest ebb in a year, and inflation dipped from a 10.9% record high in July.

The annual inflation rate in Cyprus was 6.1% in March, down from 6.7% in February, according to data published by Eurostat.

The government’s decision to halve the subsidy caused an uproar among opposition parties, including main opposition DISY, which tabled the amendment to tweak a proposal submitted by the Finance Ministry to halve the subsidy.

MPs had unanimously voted in favour of keeping the freeze on consumption tax in place, including centrist parties DIKO and DIPA and social democrats EDEK who currently back President Nikos Christodoulides’ minority government.