Retailers complain they weren’t warned in time
THE V.A.T. Service yesterday rejected claims that it had left shopkeepers and service providers in the dark on the new tax cuts introduced last Friday.
One VAT official claimed the changes had been known since last July and it was up to those affected to seek further information.
VAT dropped from 15 per cent to five per cent on a whole range of goods and services last week. The drop apparently took many supermarkets and shopkeepers by surprise. They were angry with the Finance Ministry for not giving ample warning.
“We did receive complaints from supermarkets but wrongly so. The Finance Minister informed everyone. We first announced these measures on July 4 2007. We also sent out an informative circular last Thursday to the Chamber of Commerce and accountants,” VAT official Kostas Nicolaides.
The Cyprus Consumers’ Association CCA President Petros Markou said he was happy with the way most supermarkets were adjusting to the changes.
“We started a campaign in a few supermarkets, not all of course, and we were happy with what we saw.
“People were working till the early hours of the morning to make the necessary changes. I’d say about 95 per cent have been made. It’s good, but there’s still work to be done on the fizzy drinks and services.
“The VAT Service has yet to clear up exactly which services are included in the reduction. They have to do this so the law can be implemented immediately,” he said.
Asked to respond to the criticism, Nicolaides said: “From our point of view, everything has been clarified. But we remain at people’s disposal to give any further explanations.”
The full package introduced by the government to combat the ever-rising cost of living included changes to consumer tax on soft drinks and heating fuel as well as the VAT reductions.
A Finance Ministry official told the Cyprus Mail that the minister chose which items to reduce VAT on based on a list of potential targets compiled by the EU.
Regarding the services tax cut, the government sought two exemptions from a list of labour intensive services.
Before getting EU approval, the government had to prove that a cut in VAT on hairdressing and home repairs and renovations would create a positive impact on labour by increasing employment in that area.
The consumer tax on soft drinks was abolished completely while heating fuel consumer tax went down from 11.3 to 7.3 cents per litre. The soft drinks tax was removed after the ministry decided that the cost of placing finance officials at various factories across the island outweighed the benefit of tax revenue.
The VAT cut from 15 to five per cent affected a number of goods and services:
– Confectionary items, chocolate, chocolate-covered biscuits, cakes, fruit pastilles, chewing gum with sugar, mahalepi, donuts with chocolate, croissants with chocolate or cocoa filling;
– Bottled water, manufactured drinks, fruit drinks (excluding fizzy drinks, wine and beer that still have 15 per cent VAT imposed);
– Certain ingredients used in the production of food;
– Syrups and powder used for making drinks;
– Health products like diet products and vitamins;
– Vaccinations for humans and animals;
– Contraceptive products;
– Feminine hygiene products;
– Medical equipment for the disabled;
– Children’s car seats;
– Tickets to funfairs, concerts, circus, museums, zoo, cinema, and sports events;
– Repair of medical equipment for the disabled
– Doctor and dentist services, though the levy for cosmetic and aesthetic procedures will remain at 15 per cent;
– Animal food, including food for pets, fish and birds;
– Hairdressers;
– Renovation and reconstruction of private houses (at least three years after their use) involving plumbing, electrical work, carpentry, painting and building work (excluding extensions, carpet installations, garage or swimming pool). Also, if the cost of the materials exceeds the cost of labour, then VAT will be charged at 15 per cent on that material. Otherwise the total cost (labour and materials) will include a five per cent levy.
Meanwhile, Cyprus remains committed to introducing five per cent VAT in 2008 on food and pharmaceuticals, and 15 per cent VAT on land, all of which are currently zero-rated, as well as increasing VAT on restaurant bills from the current eight to 15 per cent.
The government has sought an extension to the January 1 deadline which coincides with the introduction of the euro.
