Green taxes ‘will squeeze’ consumers

The head of the consumers’ association on Monday predicted that fuel prices will continue to rise significantly, squeezing the average householder, while others also expressed concerns over the effects of the green taxes given rising cost-of-living.

The five-cent “green tax” on fuel is expected to kick in within two to four months, but already the Cyprus Consumers Association predicts an increase in the scope of 10-11 cents, its representative Marios Drousiotis told state broadcaster CyBC.

If recent rises in the cost of crude oil are added to the five cents from the soon-to-be introduced carbon tax, as well as one cent from VAT, plus eight additional cents once the state fuel subsidy ends, Drousiotis noted that Cypriot drivers face increases of up to 16 cents/litre by the end of June.

The fuel cost tax and other green taxation is under discussion following suggestions from a state-commissioned data modelling study undertaken by a team of financial experts from the University of Cyprus.

Compensatory measures for consumers, meant to nudge businesses and individuals toward energy saving and other environmentally friendly habits, are in the process of being hammered out by various stakeholders.

Finance Minister Makis Keravnos on Friday offered assurances that the green transition and anticipated taxes would pose no threat to households or businesses.

But Sotiroulla Charalambous, union head at the Pancyprian Federation of Labour (PEO), said that “a wider social policy” was needed to counter the impacts of impending green taxation.

“Compensatory measures and incentivization towards more sustainable behaviours must be aimed in the right direction if people are to be prevented from slipping into poverty,” she said.

Charalambous brought up the example of one measure under discussion – that of providing households with free public transportation after the new tax makes car travel prohibitively expensive.

“This is an unfeasible solution [while] the infrastructure for public transport remains subpar,” she noted.

Charalambous also pointed out that subsidies for electric vehicles (EVs) are currently exclusionary, being realistic only for those with high incomes. She suggested that if the goal is to encourage sustainability, the state should consider subsidising acquisition of EVs up to 80 per cent for some populations.

Michalis Antoniou, head of the Cyprus Employers & Industrialists Federation (OEB), said that businesses had long anticipated the arrival of the taxes announced through the Green Deal, and that they would be painful but necessary.

He added that his association was hoping for tax reforms to lighten the increased tax burdens businesses had taken on during the crisis of 2011-2013.

Head of the hoteliers association (Pasyxe) Philokypros Roussounides also weighed in on the matter, addressing the currently floated idea of introducing a green tourist tax of €2.50 per person per night.

“If the [proposed tax] affects five per cent of tourists, this would mean 200,000 people will not visit the island and this will put a huge dent in income from tourism,” he noted, adding that currently tour operators and partners compete over mere euros in their bids to win over potential holidaymakers.

He added that the vast majority of hotels on the island were built around the 1980s – and that energy upgrades to these buildings were often expensive and rooftop solar unfeasible. Thus it is not always true that carbon emissions, fuel, and water taxation could be offset with touted cost savings from energy efficiency.

“Nonetheless, many in the sector have already undertaken actions towards sustainable tourism of their own initiative and partners are also expecting and demanding these [changes],” Roussounides said.