The House yesterday approved amendments to consumer tax and VAT legislation in light to tomorrow’s accession to the European Union.
The changes, which took immediate effect, have prompted, among others, a 0.3 cent raise per litre of diesel and 0.5 cents per litre of leaded petrol.
The new legislation also liberalised the fuel market in order to promote conditions of healthy competition while at the same time securing consumer interests.
The law will take effect upon publication in the government gazette.
The new legislation however provided the commerce and industry minister with the authority to step in and set a price ceiling when it is deemed that prices were unjustifiably high.
The amendments were discussed yesterday morning by the joint House Finance and European Affairs Committees and also provide for the imposition of a five per cent VAT tax on items that had been exempted up until yesterday.
The changes translate in a reduction in the prices of cigarettes and imported alcoholic drinks but at the same time an increase in the price of locally produced drinks.
Though expensive cigarettes would become more expensive, according to Finance Minister Marcos Kyprianou.
VAT – 15 per cent – will now be levied on children’s clothing, which was previously exempted while newspapers and magazines would now carry a five per cent VAT levy.
Kyprianou said Cyprus was obliged to impose VAT on certain items but had the choice of a reduced coefficient.
He added however that medicine, plots of land for building and food would continue to be exempted until 2007.
The minister said VAT would be imposed on new buildings applying for building permit after May 1.
It has been agreed with the House Finance Committee to adopt the alternative of a five per cent VAT on the first home to be changed in the future to 15 per cent but with the government stepping in and covering the cost, the Minister said.
Kyprianou said the government tried to secure an exemption for products used by handicapped people but was unsuccessful as “all that had been already agreed during the negotiations”.
He added: “The cabinet has decided to foot the additional cost of the products used by the handicapped, either by providing the equipment or with additional subsidisation.”
Kyprianou however took a shot at the previous government saying that Cyprus was at the final stages of harmonisation and the current government was faced with decisions taken before it assumed its duties.
