The state should proceed with the taxation of the windfall profits of banks and renewable energy (RES) companies to procure revenue for implementation of an integrated social policy, PEO union said on Wednesday.

The union claimed that is the only way to provide an effective social safety net for vulnerable groups, pensioners and employers, in view of the high cost of living, which is expected to worsen through the imminent introduction of green taxation.

A statement from the union noted the government is moving forward with the introduction of green taxes within the first half of 2024 while at the same time significant strata of society are suffering the effects of high prices and interest rates.

“The imposition of so-called green taxes on fuel, water and hotel accommodation will hurt the economy and especially households, particularly in the energy sector,” PEO said.

The outgoing Anastasiades government had committed to the introduction of green taxation linked with disbursement of the EU’s recovery and resilience funds (RRF) the union said, however, it charged that no specifics had been offered to the public.

“We have not received specific answers about the criteria and how the amounts proposed for these new taxes were derived,” PEO said.

A University of Cyprus team of financial experts had been commissioned to carry out a computer modelling exercise over the matter which, among other suggestions, lead to a proposed 5 per cent tax on fuel and a tourist tax of €2.50 per person per night.

Finance Minister Makis Keravnos meanwhile has offered assurances that the green transition and integrated tax reform would be fiscally neutral.

But PEO took issue with the fact that details of touted compensatory measures for households and businesses have been vague.

“The government needs to show the necessary political will to proceed with the taxation of the windfall profits of banks and RES companies so that the state has [the] revenue [to prevent] further deterioration of their standard of living,” the union said.

It went on to accuse the state of implementing a short-sighted policy of granting one-off payments and subsidies which is assessed as inadequate to offset the permanent higher costs imposed by green taxation on essential products.

Among its suggestions, Peo recalled it had advocated for inclusion of low-income pensioners in reduced electricity tariffs, lowering lending rates, tackling profiteering, raising the guaranteed minimum income (GMI), increasing subsidies for electric vehicles for lower to middle income households, and substantial improvements to the public transport system.