The full bench of the Supreme Court on Wednesday decided the law on reducing VAT for electricity is unconstitutional, as it violates the separation of powers.
According to the decision, parliament’s move to legislate a reduction of VAT for electricity “interferes with the authority of the executive”, which is the body that can determine which transactions will be subject to reduced VAT.
The law in question put an end to charging VAT on emission costs in electricity bills. Following the advice of the attorney general, who opined it violated the separation of powers, President Nicos Anastasiades sent the law back to parliament.
Nonetheless, parliament rejected the referral, leaving the only available option to the Supreme Court to make a decision.
The full bench of the Supreme Court agreed with the attorney-general’s position, specifying cabinet should be the one to decide which exchanges can be subject to reduced VAT.
The authority should be kept within the confines of the executive power, as the finance ministry is the responsible body on negotiating with the VAT committee on an EU level, and evaluating the financial impact of changing VAT on state coffers.
“Only the executive can carry out this evaluation as it ensures VAT collection.”
This tax is also collected by other EU member states and is a resource for the EU, the decision concluded.
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