Green light for VAT hike on food and medicine

THE HOUSE yesterday approved by majority vote a bill introducing 5.0 per cent VAT on foodstuff and pharmaceuticals, which will come to force early in 2011.

The bill was passed by majority vote, with 26 MPs from ruling AKEL and coalition partner DIKO voting in favour, and 19 votes against from opposition DISY, EDEK, EVROKO and the Green Party.

An amendment proposed by DIKO to have the new law apply as of January 10, 2011 – instead of January 1, as proposed in the bill – was unanimously approved, in a bid to help businesses and the authorities adjust to the new tax.

Before the vote, DISY vice chairman Averof Neophytou asked for pharmaceuticals to be exempted, as it would not affect state revenues significantly and there would not be any problems with the European Union.

Neophytou said the sale of pharmaceuticals in Cyprus, both in the private and public sectors, did not exceed €200 million annually, with around half being state purchases.

“So, from an estimated €10 million the state expects to receive, €5 million will be paid by the government to drug companies, who will then wait many months to take them back,” Neophytou said.

He added that the whole affair will affect the financially weak groups who do not have the resources to buy expensive medicines not available at state hospitals.

However, his proposal was rejected by AKEL and DIKO, and despite having the support of the remaining parties, it couldn’t be approved.

It still prompted a reaction by AKEL spokesman Stavros Evagorou, who said his party had been taken by surprise with Neophytou’s proposal and suggestion to sidestep Cyprus’ obligations to the EU, when DISY has so vehemently been pro-EU.

Evagorou pointed out that 80 per cent of the public had access to public healthcare, while adding that offsetting measures could be taken to ease the blow.

Neophytou retorted that the government wasn’t so intent on fulfilling the EU obligation of imposing 15 per cent VAT on immovable property, “to save the wealthy.”

“But the government has no problem with imposing VAT on the public,” said Neophytou.

According to the new law, 5.0 per cent VAT will be imposed on all foodstuff and pharmaceuticals, as of January 10, 2011.

Furthermore, restaurant food, the VAT of which was last year reduced by 3.0 per cent for a year, will now be brought back to 8.0 per cent.



The Cyprus Mail is the only English-language daily newspaper published in Cyprus. It was established in 1945 and today, with its popular and widely-read website, the Cyprus Mail is among the most trusted news sites in Cyprus. The newspaper is not affiliated with any political parties and has always striven to maintain its independence. Over the past 70-plus years, the Cyprus Mail, with a small dedicated team, has covered momentous events in Cyprus’ modern history, chronicling the last gasps of British colonial rule, Cyprus’ truncated independence, the coup and Turkish invasion, and the decades of negotiations to stitch the divided island back together, plus a myriad of scandals, murders, and human interests stories that capture the island and its -people. Observers describe it as politically conservative.