Filenews 19 April 2023 - by Eleftheria Paizanou
The inflationary pressures that continue to eat away at the incomes of thousands of households, as well as the increase in borrowing rates, which makes the instalments of many families unbearable and further reduces disposable income for the absolutely necessary consumption, lead the Government to serious thoughts about reducing or even eliminating VAT on some food and other basic necessities.
As "F" is informed, in some cases of widely consumed foods it is possible that VAT will be reduced to zero for some time, in order to relieve consumers.
According to F's information, the Commission has signalled to EU member states that they have the option to reduce VAT on 10 to 15 basic necessities, in order to relieve households somewhat. The reduction of VAT on some consumer products is allowed by the European Directive. In fact, some countries have already reduced VAT on a range of food and other products.
As we are told, the Ministries of Finance and Trade are already cooperating on the selection of goods for which the EU will be asked to reduce or reduce VAT to zero. Technocrats from the two ministries are working on bills that must be submitted to Parliament for approval.
Among the scenarios envisaged is zero VAT on milk, bread and baby food. These are products that have great weight every week in the needs of households. Today, these products are subject to 5% VAT.
As "F" is also informed, there are thoughts of reducing VAT from 19% to 5% for a number of other consumer products that are widely consumed, such as detergents, washing softeners, toilet paper, baby diapers, cleaning supplies and adult diapers.
Both the zero VAT rate and the reduced VAT 5% will most likely include other products, as the relevant lists have not been finalized. Any changes decided will be subject to approval by Brussels, as VAT is also a revenue of the European Union.
The final say on the finalization of the bills and their duration will lie with the Ministry of Finance, as it will have to ensure that the state's finances will not be substantially affected by tax reductions. In addition, it is working on mechanisms to ensure, if possible, that the reduction of VAT on some products will really benefit consumers with a corresponding reduction in final prices and not some entrepreneurs, through an additional charge on products to increase the rate of profit.
Christodoulides pledged before the elections
Before the elections, Nikos Christodoulides had said that his priorities were the reduction of VAT on photovoltaics, through a decree, from 19% to 0%, the reduction of VAT on children's items from 19% to 5% and the increase of tax-free income from €19,500 to €24,500. It is worth noting that the increase in tax-free income is included in the broader reform of the country's tax system, for which the Ministry of Finance has begun the relevant study. The government's economic team believes that the tax reform will help increase the disposable income of the lowest paid groups.
It is noted that in the context of curbing inflation, a few days ago the Council of Ministers approved an extension for another two months (May-June) of the subsidy for electricity consumption at a cost of €21 million. In addition, it has approved from May 5 until the end of June an extension of the reduction in excise taxes on fuel, but by 50% compared to the reduction that will apply until May 4. The cost to the state is estimated at €5.96 million.
POINT OF VIEW
Households have been brought to their knees
Month in, month out, and many households count euros one by one to make ends meet. In many products that have wide consumption, prices rise endlessly, resulting in the household basket costing much more than last year, even compared to every previous month. Something that was particularly noticeable during the purchases made by consumers for Easter. If the government implements the reduction of VAT on some food or other products, consumers who pay more and shop less may breathe a little. Now, the living conditions of households have become a real suffering, as as soon as the month begins their income disappears rapidly.
