Consumers association calls on officials to enforce zero VAT rules

Officials should monitor and report any retailers not meeting consumer expectations regarding zero VAT on certain goods, consumer association head Marios Drousiotis said on Wednesday, following the previous day’s cabinet decision.

According to the decision, the zero VAT will apply to bread, milk, eggs, baby foods, adult and baby diapers, as well as female hygiene products. The measure will be in place from this Friday.

Drousiotis said the consumer association welcomes any efforts “to lighten the burden on family incomes during these difficult times”.

Consumers should be alert to any unexpected price hikes on these goods, he added, but at the same time, the state must ensure that the VAT cuts will benefit the consumer directly, “and not benefit the intermediaries”.

He explained that he was bringing it up as “nine months ago, when VAT on fuel was lowered by 8.3 cents per litre, this reduction did not wholly benefit the consumer, as prices fell by 7.3 cents per litre, meaning the 1 cent was absorbed by petrol stations”.

Drousiotis further explained that a reduction in VAT does not mean a reduction in the retail price of goods, as it will only show on receipts. This means that for the goods where zero VAT was agreed, receipts will not include the VAT rate at the bottom.

“On the other hand, retailers do have the right to raise the prices of these goods, it’s not illegal,” he said, adding that this means that prices may not necessarily change, despite the VAT reduction.

“For example, if milk costs €2 and must be lowered by 5 per cent, which amounts to 10 cents, some businesses may increase the price of milk by 10 cents, so consumers will see no change in price,” he said.

This issue could be tackled if the energy ministry, the relevant authority, closely monitors prices and names any businesses not complying to the VAT reduction decision, Drousiotis said.

“If this starts now, it could prevent, to a degree, those attempting to make a profit out of the reductions,” he added.

However, he noted that consumers should keep in mind that “it is not mandatory” for retail prices to increase or decrease, and that there are some who will benefit.

Shops have suppliers and importers and if the importers raise their prices, the shops will follow suit, he said.

Drousiotis said that another phenomenon that may prompt consumer complaints is the possibility of businesses that have already announced offers on some of the products that will have zero VAT as of Friday, to cancel them and reinstate regular selling prices.

This may cause reactions but it will be justified as “they have no choice,” he said.

Meanwhile, the Cyprus association for consumers and quality of life welcomed Tuesday’s decision in a press release applauding the new government “for finally caring about consumers and market issues,” and for offering a way out of the everyday issues of inflation.

The zero-VAT decision, and the expected implementation of the e-kalathi platform are “practical steps that show good intentions, and that we welcome,” the press release said.

Nevertheless, the association expressed their anxiety around the need for measures that will ensure the full transfer of the positive effects to consumers, and the suppression of profiteering “by some shrewd traders who unfortunately always exist and try to use tricks to usurp the benefit themselves”.

Finally, they said they will expect the new government to continue in its “efforts to improve the general situation for consumers” and move towards full independence for the Consumer Protection Service, according to the model of the institution of the consumer commissioner “as it operates in progressive countries with advanced consumer protection”.