House rejects president’s veto on lower VAT for electricity (updated)

Parliament on Tuesday rejected a presidential veto of a bill passed by opposition parties to cut VAT on electricity bills from 19 per cent to 9 per cent across the board for an indefinite period.

The rejection was unanimous as even ruling Disy voted in favour but for different reasons.

MP Harris Georgiades said the party did not change its position on the essence of the issue, but it rejected the veto for constitutional reasons relating to the right of the legislature to draft the state’s tax policy.

The president’s veto had been expected after the government warned it would have a huge impact on state finances. The government stood to lose some €75m.

President Nicos Anastasiades also argued that the bill violated the separation of powers.

The matter will most likely be referred to the Supreme Court, which has the final say on constitutional matters.

In the meantime, the government had approved a decree reducing VAT on household bills to 5 per cent for vulnerable groups and 9 per cent for the rest, for six and three months respectively, starting November 1.

Finance Minister Constantinos Petrides told the House finance committee before the vote that the government had rolled out more relief measures than other countries with bigger hikes in the price of electricity.

He reminded MPs that he had urged them to avoid proposals lacking specific aim, which also clashed with the European Commission guidelines and put public finances at risk.

A Legal Service representative told MPs that the president had vetoed the bill because it violated European law and the separation of powers. It also derailed the state’s fiscal planning by depriving it of €75m annually, without setting a time limit.

The plenum nevertheless rejected the veto, sending the bill back to the Presidential Palace. Anastasiades can either accept the decision and sign the bill into force or refer it to the Supreme Court.

Describing the opposition’s amendment as a PR stunt, Georgiades said his party disagreed with the government over the argument that it could not cut taxes.

The Disy MP said the discussion must be done using political arguments and not claims that disputed parliament’s power to raise and reduce taxes.