**Nicosia, Cyprus** – In a move aimed at alleviating ongoing financial pressures on households, the Cypriot Council of Ministers has sanctioned the continuation of a reduced Value Added Tax (VAT) rate on electricity bills. The decision, reached during a cabinet meeting on Wednesday, will see the concession extended until March 31, 2027, providing an additional year of respite beyond its previously scheduled expiration date of March 31, 2026.
This significant policy extension underscores the government's acknowledgement that elevated energy prices continue to exert a substantial strain on household budgets. Despite a year having passed since the initial implementation of the reduced VAT rate, the cost of electricity supply has not witnessed the substantial decline anticipated. Finance Minister Makis Keravnos articulated the rationale behind the decision, stating, "The price of electricity supply has not decreased compared to the corresponding period last year." This persistent economic reality has prompted the administration to prolong the measure, thereby mitigating the impact of high energy expenditures on citizens.
The reduced VAT rate, originally introduced as a provisional intervention to counteract a surge in energy costs, has proven to be a crucial lifeline for many families. By lowering the VAT applied to electricity consumption, the government aims to directly support household incomes and provide a measure of financial stability in an environment characterised by elevated living expenses. The extension signifies a commitment to sustained relief, ensuring that electricity bills remain more manageable for an extended period.
The fiscal implications of this decision are not insignificant. The state is projected to incur an expenditure of approximately €40 million to accommodate the prolonged application of the reduced tax rate. This represents a conscious allocation of public funds towards cushioning the economic blow of high energy tariffs on the general populace. The measure, therefore, is not merely a reactive response but a proactive strategy within a broader governmental framework designed to address the persistent challenge of energy affordability.
The impact of this policy extension will be felt directly by households across Cyprus. Consumers will continue to benefit from lower VAT charges on their electricity consumption, a tangible difference compared to the standard rate that would otherwise apply. This ongoing financial relief is particularly pertinent as many families navigate the complexities of rising costs across various essential sectors. The government's decision reinforces its commitment to providing a degree of insulation against economic volatility, particularly concerning fundamental utilities.
This latest development reflects a pragmatic approach to economic management, prioritising the welfare of citizens in the face of enduring global energy market fluctuations. The extension of the reduced VAT rate on electricity bills signals a recognition that the economic headwinds impacting household finances are likely to persist, necessitating continued governmental support. As Cyprus navigates these challenging economic waters, this policy intervention stands as a key component of its strategy to foster economic resilience and safeguard the financial well-being of its residents.