Nicosia, Cyprus. Finance Minister Makis Keravnos said the government will extend the reduced value added tax rate on household electricity consumption for another year. He said the measure will now run until the end of March next year.
Extension of reduced VAT rate
Speaking after Wednesday’s cabinet meeting, Keravnos said the policy had been in place since the end of March last year and was due to expire at the end of March this year. He said the decision was taken because the price of electricity supply has not decreased compared with the corresponding period last year.
Keravnos said the measure carries a cost of €40 million and is being advanced as part of the evaluation of measures to address increased energy prices and efforts to increase household disposable income.
The policy applies a VAT rate of nine per cent on household electricity instead of the typical 19 per cent. It was initially announced during President Nikos Christodoulides’ televised address reviewing his second year in office in March last year, when he said the government’s policies reflect its political philosophy of social liberalism and a human-centric approach.
Context of energy market changes
The extension comes after Cyprus’ energy market opened up to private companies for the first time in October last year. At the time, the energy regulatory authority, Cera, said the move would mark a new era in the electricity sector, with the aim of moving toward a fully free competitive market in which producers, suppliers and end customers can decide among themselves how to manage and pay for electricity.
Questions were raised then about whether opening the energy grid would reduce consumers’ bills. Energy minister at the time, George Papanastasiou, said he could not say whether prices would go down, noting that the “target model” had not been tested in small markets such as Cyprus.
How do you expect the extended reduced VAT rate to affect your household electricity bill over the next year?
