Fuel tax freeze coming to an end

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Cypriots will see energy costs rise overnight when a freeze on consumer tax on fuel and a government subsidy on electricity bills expire at the end of June.

The relief measures introduced to buffer hiking inflation are set to expire on July 1, which would see fuel prices shoot up by eight cents per litre, and a €68.72 discount on electricity bills scrapped.

In comments to Alpha TV, the Finance Ministry’s permanent secretary George Panteli said the government is not considering renewing the two measures.

Panteli argued that from the ministry’s analysis, “it became clear that continuation of the reduced consumption tax on fuel is not justified.

“As of July 1, the price of motor fuels will return to normal levels and increase by approximately 8.32 cents per litre”.

He said that pump prices today had decreased to approximately the levels of March 2022, when the freeze on consumption taxes on fuel was introduced.

The government’s decision had met criticism, as prices were at the same point when the measure was deemed necessary to ease inflation pressures.

Based on today’s fuel prices, from July 1, the average price of 95 octane unleaded petrol and diesel will rise from €1.38 per litre to €1.46 a litre.

Also, the average price of heating oil will increase by around 6.2 cents per litre to €1.04 per litre, up from 0.98 cents.

According to a European Commission bulletin, the average fuel price in Cyprus on March 7, 2022, before the reduction in consumption tax, was:

– unleaded 95 octane €1.43 per litre

– diesel €1.49 per liter

– heating oil €1.22 per litre.

The tax freeze has cost the state over €100 mln in lost revenue but offered drivers a respite from soaring prices.

Meanwhile, the government has no plans to extend a subsidy on electricity bills introduced by the previous administration.

Panteli told Alpha TV that the government would consider reinstating the measure in September.

The scheme was introduced to cover the increase in bills resulting from the government’s decision to reinstate VAT to 19% after lowering it to 9% for a ten-month grace period.

It foresaw discounted bills of up to €68.72 and was to expire at the end of April.

The measure has benefitted some 449,000 households and 111,500 businesses. The estimated cost of the measure from September 2022 until the end of April is €95 mln.

Both measures were implemented during the administration of Nikos Anastasiadis and extended by the new government.