House meets after president sends back bills

The House plenary is holding an extraordinary session on Tuesday after President Nicos Anastasiades sent back three bills approved by MPs recently – two relating to VAT on electricity and fuel and the other on extending a freeze on property foreclosures.

The House finance committee is due to meet earlier, in the presence of the attorney general.

Acting on the advice of the attorney general, the president had argued in his letter to House speaker Annita Demetriou that the bills violated various articles of the constitution. And he also argued that they would have a major impact on public finances, derailing the country’s fiscal commitments and objectives.

The House can either accept the president’s arguments and reconsider or vote again on the bills in which case the president has the option to refer them to the supreme court to rule on their constitutionality.

In the case of the first bill, the president said that the estimated loss of revenue from the non-imposition of VAT on the excise duty on fuel for the period up to December 31, 2022, is €30 million.

And as regards the second bill, the estimated loss of zero VAT on electricity invoices for the period July-December 2022 amounts to €45 million.

The president further argued that the public finances are disproportionately burdened by the adoption of what he called “non-targeted” measures, which are neither adapted to the relative financial capacity of consumers, nor achieve the goal for which they are intended, which is to relieve electricity consumers from the increase in costs.

“If the purpose is to relieve households and businesses […] these legislative proposals will have the opposite effect,” the president said, adding that the biggest benefit from further tax cuts will go to the biggest electricity consumers, taking advantage of the loss of revenue from the state.

In relation to the law on the suspension of foreclosures for three months, Anastasiades said he does not support such a move since “continuous suspensions can be interpreted as permanent rather than temporary both by the borrowers and from the supervisory side.”

Christiana Erotokritou, Diko member and MP, speaking on CyBC radio Tuesday morning ahead of the session, disagreed, saying that the vast majority of countries in the EU have adopted the measure of a reduction on taxes, until the end of December 2022 in order to provide relief to their citizens, not only from high energy but also from high fuel costs.

Erotokritou argued that both umbrella as well as targeted measures could co-exist simultaneously and that the current high costs were utterly unsustainable for the average Cypriot consumer, and for small and medium businesses.

“Electricity and fuel should not be luxury items. We cannot reduce the cost of crude oil, but this [reduction of VAT] we can do,” she said, adding that Cypriots do not have any option but to buy fuel, unlike in other countries where the public transport system is well-developed.

Akel MP, Giorgos Loukaides, speaking on the same programme, echoed Erotokritou’s remarks, characterising the current situation as a “price increase tsunami” and saying the situation was highly concerning, as there is a large group of lower-income households, including pensioners, who are extremely squeezed and in danger of falling through the cracks, and for whom the current sliding scale measures are simply not sufficient.

“These people are living pay cheque to pay cheque,” he said, accusing the government of being out of touch.

Loukaides criticised the current strategy as fragmented and spoke out against what he called government “profiteering” from taxations on the banking system.

Disy MP, Savia Orphanidou, for her part said the government’s aim was to relieve citizens without derailing public finances and that it therefore needed to proceed prudently.

“The crisis is imported, it is not of our own making,” she said, arguing that already 450,000 households and 12,000 businesses were being relieved through the current measures.