Zero VAT can’t prevent Cyprus hikes
Many products subject to zero value-added tax rates in Cyprus saw unexpected price increases in July 2023. The island’s consumer association has raised concerns about the effectiveness of this measure following recent additions to the list of zero-rated items.
In July 2023, 21% of products previously subject to zero VAT had higher prices than in April before the zero VAT rate was applied. Also in July, 27% of products with zero VAT rates had higher prices than in May, even after the implementation of the zero VAT rate.
Surprisingly, in July, a whopping 83% of products with zero VAT rates were priced higher than the expected May prices, compared to the prices in April 2023 before the zero VAT rate took effect.
These findings suggest that three months after the Cypriot government introduced the zero VAT rate, the prices of 83% of these products exceeded consumers’ expectations, raising questions about the actual impact of this tax measure.
Last week Nicosia decided to extend the application of the zero VAT rate on essential goods for another six months, with Finance Minister Makis Keravnos announcing the addition of coffee and sugar to the list of exempted products.
