Reduced excise tax on fuel extended until mid-January

The Cyprus government extended the reduced excise duties on fuel until 15 January 2023 on Friday, in a bid to alleviate the effects of soaring inflation fuelled by the war in Ukraine, with the Finance Minister calling on Households and businesses to save energy as fiscal measures cannot tackle the problem of price hikes in its entirety.

The Council of Ministers at an extraordinary meeting chaired by Acting President, President of the Parliament Annita Demetriou approved a bill to extend the reduction of excised tax on fuel until 15 January. The bill provides the reduction of excise tax by 7 cents on Unleaded 95, by 8.2 cents on Diesel and by 6.4 cents on heating oil.

In statements to CNA, Finance Minister Constantinos Petrides said the estimated fiscal cost is around €6.5 million with the total cost of reduction of excise tax so far estimated at around €35 million.

“Cyprus remains the country with the lowest excise tax rate on fuel in the EU,” Petrides said, noting that Cyprus’ excise tax rate is the lowest allowed by EU rules.

He also pointed out that despite government measures, according to the latest available data, fuel prices have declined by 19% for unleaded 95 and by 8% for diesel and heating oil since their peak in July.

Moreover, Petrides recalled that electricity bills are subsidized by the third government scheme which is in place until the end of the year. He added that the first scheme provided for the reduction of electricity bills by the Electricity Authority of Cyprus, the second featured a temporary reduction of the VAT rate on electricity bills, while the third provided for a subsidy by the government aiming to reduce the effects by the restoration of VAT rates and to cover the increase of electricity bills by the EA due the increase in oil prices.

“The government measures aiming to support businesses and households exceed €400 million,” the Finance Minister noted.

However, Petrides urged households and businesses alike to save energy in line with the EU directives.

“These measures alleviate the problem but cannot tackle the problem of inflation in its entirety,” he stressed, urging households and businesses to utilize the government subsidy schemes for the installation of photovoltaic systems and energy efficiency.