Cap on fuel prices, freeze on VAT

Parliament on Thursday voted through a legislative proposal that empowers the government to order a price cap on petroleum products, and also passed bills cutting to zero the VAT charged on fuel and on electricity bills until the end of the year.

The price ceiling bill, tabled by main opposition Akel, allows the energy and commerce minister to issue decrees designating the maximum retail and wholesale prices for petroleum products in cases where the minister “legitimately believes” that these prices are “far higher than otherwise justified by local and international conditions.”

The new law also gives the minister the discretion to set a maximum gross profit threshold for companies trading in these products.

The minister will be able to intervene in the market whenever “conditions in the global economy are being disrupted, affecting supply chains for specific products or raw materials.”

In addition, the House passed a government bill that allows the commerce ministry to set a price ceiling on essential items – bread, water, Cypriot coffee, wheat and corn.

Also on Thursday, MPs voted through two legislative proposals aimed at providing relief to consumers amid the current inflation spiral.

Under one of the bills, until the end of the year no VAT will be levied on fuel products; under the other, likewise VAT on electricity bills will be reduced to zero.

Earlier this week, the state-run power corporation confirmed that the next electricity bills to be sent will be about 25 per cent more expensive than the last batch.

The Electricity Authority of Cyprus said the cost of fuel they currently purchase for power generation has doubled since a year ago.