However, Petrides appeared ready to consult with parliament to promote comprehensive rather than piecemeal measures to address the crisis.
A proposal for a law by the PPP Co-operation provided for the inclusion for a period of six months of the supply of food and medicines in the zero VAT rate and the supply of electricity, restaurant and catering services to a reduced VAT rate of 5% and a zero VAT rate for the part of final electricity bills relating to the cost of purchasing greenhouse gas emission allowances.
AKEL's draft law provided for the non-imposition of VAT on the excise duty charged on petroleum products.
DIKO proposed in a law proposal the inclusion, until the end of 2022, of the zero rate of VAT on the fuel price adjustment, which is incorporated in the final electricity consumption bills of AHK and which includes the percentage of the cost of purchasing greenhouse gas emission allowances, the cost of purchasing fuel and the cost of maintaining strategic reserves.
In rejecting the proposals, the Finance Minister said, inter alia, that tax rebates amount to inflationary expansion and are by definition inflationary, adding that very often VAT reductions are not reflected in prices and do not serve vulnerable groups of the population, but instead are likely to create obscenity.
[/P]He also said that the biggest benefit of further tax cuts would be passed on to larger electricity consumers, who should be under pressure to reduce their electricity consumption.
He added that compared to the rest of Europe, electricity taxes and network costs amount to 49% of the final price compared to 63.1% in the rest of the euro area. He recalled that the government has proceeded to reduce VAT on electricity from 19% to 9% and 5% for the vulnerable. He also pointed out that across-the-board reductions would have a more inflationary impact by increasing inequalities.
Mr. Petrides also noted that the government's policies to promote renewable energy are aimed at the root of the problem, namely the decoupling of businesses, especially vulnerable ones, from fossil fuels, rather than draining fiscal reserves in the short term with little benefit.
He also stated that further tax cuts are a disincentive to avoid wastage in electricity, which contradicts both the EU and Cyprus' green transition targets.
He also noted that the legislative proposals cost around €300 million per year significantly eroding public finances. He also said that the three proposals are against the European acquis.
At the same time, he said that the government has already adopted two packages of measures to mitigate the effects of the war in Ukraine and inflation totalling €300 million.
He noted that the parties' proposals affect macroeconomic stability and therefore cannot be accepted.
Regarding questions he received about the fuel supply from the occupied territories, Petrides noted that the Ministry of Finance has intensified controls.
Asked about the possibility of imposing a cap on fuel prices, he said that this is something the Ministry of Trade can do based on proper analysis, since an arbitrary price setting can lead to shortages in the market.
At the same time, he said that based on the EU's policy of green transition the price of fuel is not going to go back so we should all put in photovoltaic panels, increase public transport, adjust our development goals. That is the solution, he said, not piecemeal moves.
Regarding remarks made to him by MPs about possible excess profits of oil companies he said this will be looked into by the Tax Department when these companies submit their accounts in August.
The parties are ready for further dialogue
The Chairwoman of the Finance Committee, DIKO MP Christiana Erotokritou, in a statement questioned how the reduction of VAT on electricity from 19% to 9% is not considered inflationary by the Ministry of Finance but the law proposals that have the same goal are considered inflationary.
She also said that many European countries have combined benefits to consumers either by direct payments to consumers or by reducing taxes, or by a combination of both.
With regard to the reduction in VAT on electricity he expressed the view that this can be done in a fiscally responsible way and without encouraging any inflationary trend.
"The position of the Democratic Party is that we must help consumers and particularly vulnerable groups. We will seek to continue the dialogue with the Ministry of Finance because we are confident that if the will is there, the way is also there," he said.
Meanwhile, in a written statement the Democratic Party responded to a "misleading statement by the Minister of Finance", who grouped all the parties' proposals into the €300 million cost. Clarifying that based on figures presented before the Parliamentary Finance Committee by the Finance Ministry itself, the DIKO proposal cost only 44 million euros.
DISY MP Onoufrios Koulla said that it is important that despite two years of pandemic that cost the state more than 2000 million, there are still financial possibilities to support the economy, citizens and businesses. However, he said interventions should be more on those in greatest need. He said this is what the government has done so far with two packages of about 300 million euros.
He also said that his party does not favour the piecemeal management of a serious crisis with each party putting forward a proposal for a tax cut. He added that they prefer cooperation between the legislative and executive branches of government to achieve the best economic results.
AKEL MP Aristos Damianou
said that they did not expect otherwise from the government and the Ministry of Finance when they heard today that both their own and other opposition proposals were blatantly rejected by the government. He added that he was concerned that the Minister was concerned that the reduction in excise duty would increase the purchasing power of households and increase inflationary tendencies.
If the Minister, he added, believes that the poverty of the low and middle classes will control inflation, then, he said, the slogan about the good helmsman is going out the window. He further said that it is laughable that the minister is concerned that the rich will benefit from the proposals along with the poor, since most of the policies of the government and DISY, he said, cater to the rich and the few.
He noted with satisfaction the readiness of the Ministry of Finance - under the pressure of the debate as Damianou said - to enter into a dialogue on the proposals in order to target them. He also added that a large number of EU member states have taken important decisions on excise duty and fuel as opposed to the Cyprus Government.
ELAM MP Sotiris Ioannou
said that the party submitted its own recommendations to the Minister of Finance and proposed to the Minister to issue a decree to impose a cap on fuel prices, and said that the Republic of Cyprus has great potential for saving funds. It is not possible, he added, for the Greeks of Cyprus who are going through these difficult times to say that there is a fiscal problem but for illegal immigrants there are unlimited funds. Regarding the problem with the purchase of fuel from the occupied territories and the loss of revenue for the state, he said that it is not possible for the government not to close the roadblocks.
The MP of the DPA-Cooperation Alekos Tryfonidis said that they insist on the condensation of the law proposals and consultation so that other measures can be taken in relation to the proposals for accuracy.
He pointed out that for the state there is a significant increase in revenue due to the increase in prices. He said that already for the first quarter, VAT receipts are up by €121.6 million, of which €28 million is due to the increase in electricity and fuel prices, while further increased receipts are expected due to the continued upward trend in prices. He also referred to the illegal fuel trade with the occupied territories and called on the Government to intensify controls and to consider to what extent to reduce taxation so as to provide a disincentive to purchase fuel from the occupied territories. He also called for greater scrutiny of fuel companies to determine whether there is possible obscenity and pre-arranged prices.
The Member of Parliament of the Ecologist Movement - Citizens' Co-operation Stavros Papadouris said that the issue of electricity is not a matter of monitoring prices, but of changing attitudes which should have been changed several years ago. He added how they are saying the same things they said in the past, they just didn't do the things that needed to be done. He expressed hope that they will be done from now on.
Source: CNA
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