Ministers assure VAT rise won’t hit hardest up

FINANCE MINISTER Charilaos Stavrakis yesterday sought to assure the public that the consequences of the introduction of 5.0 per cent VAT on foodstuff and pharmaceuticals would hardly be felt.

Speaking after he met Labour Minister Sotiroula Charalambous to discuss measures to counterbalance the effects of the new tax, introduced on Monday, Stavrakis said the final increase would only reach 3.0 to 3.5 per cent, effectively.

“From older studies, experience says that 30 per cent of the increase is absorbed by the merchants,” said Stavrakis. Add this to the recent 1.25 per cent increase in the Cost of Living Allowance (CoLA), the minister said the real effect of the new tax would be minimal.

He was equally optimistic over the effect of the price hikes in pharmaceuticals. “The consequences on the public will also be minimal, because based on a survey, the largest number of pharmaceuticals is purchased by public hospitals, which offer free pharmaceuticals,” Stavrakis reasoned.

Asked exactly how much the government intended to offer for counterbalancing measures, the minister said: “The revenue for state funds will be much less than €60 million, as part of it will go back to the employees through CoLA and another amount will be returned through counterbalancing measures for the members of public who are affected the most.”

The Labour Minister said her meeting with Stavrakis was mainly centred around which sectors of the public need the most help and the ways that they can be supported.

“They will be well aimed and simple in relation to the administrative cost, so that they have the most immediate and best impact on those who will be supported,” said Charalambous.

She was keen to underline the ministers’ effort to ensure the same mistakes as the past aren’t made – where for example, all pensioners were approved for Easter bonuses, independent of their wealth.

Charalambous said the two ministers hadn’t concluded on which sectors of the public would be assisted. “We exchanged views with the officials who know these sectors, but we haven’t concluded yet,” said the minister.

The ministers will continue their meeting next week.



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