Filenews 2 March 2024 - by Adamos Adamou
The products and services that will be burdened due to green taxation, with which the tax reform is initiated, were revealed yesterday at the Ministry of Finance for the Project Integrated Tax Transformation, undertaken by the Center for Economic Research of the University of Cyprus. However, without specifying the compensatory measures that will accompany green taxation, in order for it to be fiscally neutral. There will be a dialogue on the issue before political decisions are taken, as Makis Keravnos assured.
As the presentation shows, in the first phase the green transition will be accompanied by green charges on fuel, water and hotel accommodation.
From the green fees, the state in 2024 is expected to have additional receipts of approximately 100 million euros, which will be allocated for compensatory measures, so that households and businesses are not negatively affected by the new fees, but also for strengthening financing plans for energy saving and green investments.
Green taxes
More specifically, from this year, certainly within the first half of 2024, green taxation will burden motor fuels (gasoline and diesel), production fuels used by businesses, water and hotel accommodation, since under the scenario promoted by the Ministry of Finance, a green overnight fee of €2.50 per room per night is foreseen.
As for motor fuels, the baseline scenario is expected to impose a green levy this year – a carbon tax on motor fuels of 5 cents a litre, rising to 7 cents a litre next year and 10 cents a litre in 2026. VAT will also be levied on this charge, as is the case with other duties and taxes on fuel.
For this year alone, it is estimated that the state's additional revenues from green taxation on fuel will amount to €52 million, €19 million of which Businesses will contribute with €33 million to the Structural Funds from households. The green water levy is expected to rise to 1 cent per cubic meter, with no account for government revenues.
Revenue €13 million For this year, there will be euros from the imposition of a green tax on production fuels that will be borne by companies that use fuels for energy production (EAC and other industries that already pay fees for pollutants are excluded from taxation). This tax for this year is estimated at 7 cents a liter, for 2025 at 11 cents and for 2026 at 16 cents a liter.
However, both the state's receipts from the green tax reform and the exact amount with which fuel prices will mainly be burdened, given that the consumption tax reduction will expire at the end of March, will depend on the decisions taken by the government and subsequently promoted with bills in Parliament. Similarly, the burden on households will largely depend on the compensatory measures that will accompany the green taxes to come.
The University of Cyprus calculates the burden on households – measuring it as loss of well-being – at an average of €121 per year, with the amount increasing or decreasing depending on the composition of each household and depending on whether it is located in an urban or rural area.
