On 3 December 2021, the House of Representatives passed the Value Added Tax (Amendment) Law (No.6) of 2021, amending the Twelfth Schedule of the Basic Law and universally reducing the VAT rate imposed on the supply of electricity from 19% to 9%.
Taking into account both the economic dimension of the issue and the provisions of the legislative framework, in line with the commitments of the Republic of Cyprus stemming from the acquis communautaire, the President of the Republic of Cyprus referred the Law in question to the National Assembly for reconsideration.
The Council of State rejected the President's referral and the President of the Republic, through the Attorney General, referred the matter to the Supreme Court under Article 140 of the Constitution for its opinion on the compatibility of the Law with the Constitution, the Principle of Separation of Powers, the Financial Pact and the law of the European Union.
The Supreme Court, in a unanimous Opinion, dated. 30 November 2022, ruled that the BCA's actions constitute a violation of the Principle of Separation of Powers and the amending law in its entirety as unconstitutional. Specifically, the Opinion stated that Article 61 of the Constitution does not enable the Parliament to legislate "in all matters" and the BCA's broad and unquestioned power to exercise legislative power does not include or allow interference with the work of the Administration. The Opinion stresses that, in accordance with Community law, it follows that consultation with the VAT Commission on the imposition of a reduced rate is the responsibility of the executive, in particular the Ministry of Finance, and not the BTA.
In its Opinion, the Supreme Court fully vindicated the Government's decision to refer back and subsequently refer the Value Added Tax (Amendment) Act (No. 6) of 2021. This Opinion is a landmark and an important precedent for the Cypriot affairs and enshrines the distinction between the executive and legislative powers, allowing the executive to exercise unhindered the duties imposed on it by the Constitution and the European Community acquis, always taking into account all the facts, obligations and consequent economic consequences.
(NΓ/EXP)
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