Opposition slams government over reinstated zero VAT

Opposition parties accused the government of incompetence on Friday following the reversal of a measure aimed at tackling the high cost of living.

Both left-wing Akel and right-wing Disy accused the government of lacking a coherent plan and being out of touch with the realities faced by Cypriots.

The controversy stems from the government’s decision to scrap and ten days later to reintroduce zero VAT on essential goods, including diapers for infants and adults, baby milk, female hygiene products, fruits and vegetables.

This measure, which will be ratified by the cabinet next week, is expected to take effect in November, giving retailers time to adjust their prices. Normally, these products are subject to a 5 per cent VAT. Unlike previous versions of the policy, this time there is no set expiration date for the zero VAT measure.

Opposition parties have questioned the government’s inconsistent handling of the issue, noting that the finance ministry had only recently cited stabilisation in inflation as the reason for lifting the measure. Akel MP Giorgos Koukoumas voiced his concerns on Friday morning on radio Trito, arguing that while his party supports the continuation of zero VAT for essential goods, this move alone is insufficient.

“This is like a drop in the ocean,” said Koukoumas, pointing out that the broader cost-of-living crisis requires more comprehensive, targeted measures. He criticised the government for having no clear plan on how to address inflation, adding that it appears lost not only on this issue but also on others.

Akel has called for the reinstatement of subsidies for electricity bills, advocacy at the EU level for a 9 per cent reduction in electricity costs, and the adjustment of social benefits, many of which have not been updated for inflation since 2014. Other proposed measures include subsidising interest on housing loans, funded through taxation of banks’ excess profits, and revising minimum wage regulations to include the Automatic Price Indexation (ATA) for low-wage earners.

Disy, meanwhile, took a different stance. Party spokesman Onoufrios Koullas argued that reinstating the zero VAT is a misguided move. He stressed that the government is failing to properly assess the rapidly changing economic conditions, which now include rising inflation, increasing interest rates, and soaring housing and rent costs.

“The government doesn’t understand that we are facing an unprecedented combination of challenges, including rising inflation, increasing interest rates, and rising housing and rent costs, that requires a new policy approach,” Koullas said. He warned that bringing back “old bad practices” like the zero VAT measure would not be effective. Disy advocates for targeted support for low-income pensioners and public workers, especially those in the A1 pay scale.

In response to the criticisms, Viktoras Papadopoulos, director of the president’s press office, defended the government’s actions. “The government continuously monitors price increases, and when deemed necessary, it intervenes to support vulnerable groups of the population with targeted measures,” he said, adding that the government is ready to take further action if required.