Finance Minister Makis Keravnos on Friday defended the government’s decision to reinstate the zero VAT saying the government is not affected by external pressures.
In an interview with the Cyprus News Agency, Keravnos explained that the government is closely monitoring all developments and responds responsibly with measures, as it has done throughout nearly two years of governance, always within the limits of the economy and public finances.”
He emphasised, “We are not swayed by slogans or pressures. Our actions are focused on supporting vulnerable groups, the middle class and ensuring the sustainability of the economy and public finances.”
The minister reiterated that the government is continually reviewing support measures in response to evolving circumstances.
Addressing criticisms regarding the reinstatement of the zero VAT rate, he clarified that it applies only to specific products for certain demographic groups, which had experienced price increases of up to 150 per cent.
“This is why we decided to selectively restore the zero rate for these products,” he explained.
Earlier this month, the government had lifted the zero VAT measure, citing an improved economic outlook, only to reinstate it ten days later. This reversal sparked criticism from opposition parties, who accused the government of lacking a clear plan and being disconnected from the everyday struggles of Cypriots.
On the topic of new support measures, Keravnos noted that the ministry is actively developing initiatives for vulnerable populations and the middle class.
He mentioned that the ministry is also considering the abolition of VAT on emissions, while acknowledging the existence of legal challenges related to this proposal. “We are working to find solutions to these issues,” he added.
Keravnos is scheduled to participate in a meeting on Monday with President Christodoulides, social organisations and trade unions. He will also meet with coalition parties on Wednesday to discuss their proposals.
In his concluding statements, the finance minister highlighted the prevailing uncertainty in the external environment, noting that the repayment of the loan from the European Stability Mechanism will commence in 2025. He also pointed out potential obligations that may arise due to issues in contracts for infrastructure projects.
