A NEW benefits package should offset any price hikes in consumer goods resulting from an imminent increase on VAT, Finance Minister Michalis Sarris said yesterday.
One of the more important issues is the price of gas cylinders, used in domestic purposes for heating and cooking. With the price hike set to especially hit lower-income groups, the government is likely to face opposition in parliament to the relevant bill, particularly from communist party AKEL.
As of 2008, VAT on consumer goods must go up to 15 per cent from the current five per cent, in line with EU policy.
AKEL says that certain essential goods, such as bottled gas, should be exempt from the increase in the levy, and argues that though the government is entitled to ask for such an exemption from the EU, it has not done so.
The party has threatened to veto the bill in the House.
Statistics released for April showed a 1.6 increase in the consumer price index on the same month last year.
But according to Sarris, the government is preparing a benefits package that would more than compensate for price increases.
The new £1.5 million package would target needy groups, such as pensioners.
Moreover, said Sarris, the tax threshold would almost certainly be raised as of January 1, 2008.
Taxable income in Cyprus currently stands at £10,000 and over.
The Finance Minister was speaking on the sidelines of the FEMIP (Facility for Euro-Mediterranean Investment and Partnership) conference being held in Limassol.
FEMIP, which is managed by the European Investment Bank (EIB) and receives financial support from the European Commission, was established in October 2002.
Its priority is to stimulate private sector development in Mediterranean Partner Countries. To this end, the facility provides a variety of instruments: loans, risk capital, technical assistance and interest subsidies for environmental projects.
In line with the Wider Europe Neighbourhood Policy, FEMIP aims to help the Mediterranean partner countries meet the challenges of economic and social modernisation and enhanced regional integration, particularly in the run-up to the creation of a customs union with the EU by 2010.
Addressing the conference yesterday, Sarris said he was confident that Cyprus would continue to serve as a “bridge of communication and mutual understanding” between EU member-states and the Mediterranean partners as well as “a catalyst in the formulation of policies to face common challenges.”
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