THE PLENUM is expected to approve a law on Thursday that will reduce VAT from 8.0 per cent to 5.0 per cent for all tourist packages.
The government yesterday returned with a new bill proposing VAT reductions for hotels, this time including tourist packages as well as hotel stays.
Restaurants, however, are not included in the proposed law; as Finance Minister Charilaos Stavrakis pointed out yesterday, saying restaurants’ contribution to tourism is not high enough to warrant the tax reduction. He also explained that the cost of such a measure was too much for the government to take on during such difficult financial times.
MPs said they were pleased with the amendment and would be voting in favour of the package on Thursday.
The House Finance Committee yesterday convened to discuss a law that was passed by the Plenum two weeks ago and later referred back to Parliament by President Demetris Christofias.
The law, drafted to boost ailing tourism, proposed VAT reductions from 8.0 per cent to 5.0 per cent for hotel stays and – an addition made to the government’s bill by Parliament – restaurants across the island.
Speaking after the meeting, Stavrakis said he had explained to deputies the reasons behind the law’s referral.
“The government’s measure was a well-aimed measure with quite a high public cost to boost our tourist industry and the government felt that including all of Cyprus’ restaurants would not have been a well-aimed measure for tourism and it would lead to very high costs for the economy, at a truly difficult period,” said the minister.
“All political parties have viewed the government’s position with understanding,” he added. “We have returned with an added important amendment, which will further reinforce our tourism and make Cyprus even more competitive; the VAT reduction from 8.0 per cent to 5.0 per cent will not just cover hotel stays, but all conditions of a tourist package, meaning half-board and full-board.
“We feel the parties seem to agree with this position of the government and we are urgently waiting for this to be passed on Thursday [during the Plenum meeting].”
Stavrakis was asked to comment on what the government planned to do for restaurant owners, who are up in arms over the referral and threatening with drastic measures.
He said the government was making “great efforts” to support local restaurateurs, but the aim of this bill was to boost tourism and based on statistics, around 90 per cent of consumption at restaurants is not by tourists.
“If we expand this measure to restaurants as well, this would be at an added public cost of around €20 million yearly; a cost that would be unbearable going by today’s condition of the Cyprus economy,” said Stavrakis. “If the economy improves, I am positive that we can find solutions for restaurateurs too in the future.”
The added measure is estimated to cost between €3 and €5 million. “The hotels package will now exceed €20 million and the total package for tourism will be around €55 million,” the minister explained.
Committee Chairman Antigoni Papadopoulou of DIKO praised the government for returning with the improved package.
“This was made possible by the pressure imposed on the government, because all political parties minus AKEL had submitted amendments, as they had listened to the anxiety of the hoteliers and all those who are employed in tourism, and the fact that the government returned today with a consensual proposal that resolves the problem I fee is the result of pressure that was imposed on it,” said Papadopoulou.
“The parliamentary parties will examine the specific proposal and offer their positions on Thursday at the Plenum.”
DISY’S Maria Kyriacou added, “We have already delayed and I feel it must be submitted to the Plenum soon so that the new proposal is approved.”
