Significant increases in fuel prices are expected by the end of the month, following the President’s clarification that the across-the-board reduction in consumption tax will come to an end.
Moreover, the Ministry of Finance plans to introduce a green tax during the same period.
Specifically, by the end of March, the relief from the reduced consumption tax will cease, likely causing an 8.3-cent increase in the prices of gasoline and diesel. This increase may be further compounded by at least another 5 cents due to the green tax.
According to the bill on imposing a carbon tax on fuels, which was put up for public consultation, the Ministry of Finance aims to implement the proposed green tax on fuels from April 1.
This date marks the country’s last commitment to introduce a carbon tax on fuels as part of the Recovery and Resilience Plan. However, achieving this goal is challenging, as the bill was only put up for consultation yesterday, which is due to be completed by the 19th of the month, leaving only about 10 days for the bill to be approved by the Cabinet and Parliament.
If not by April 1, the green tax, initially adding five cents per litre to fuel prices (plus VAT), is expected to be imposed soon after.
However, if it is implemented on April 1st, it will result in a price increase of at least 14 to 15 cents per litre, not just the 8.3 cents expected due to the end of the reduced consumption tax.
Meanwhile, fuel price increases may occur in the interim, as forewarned by station owners, due to the receipt of more expensive fuel cargoes.
As of yesterday afternoon, the average national price for 95-octane gasoline was 1.386 euros per litre, and diesel was 1.512 euros per litre.
Even with the imposition of the green tax and the reinstatement of the consumption tax to 43 cents per litre from 36 cents today, the price of gasoline is expected to rise significantly but is not anticipated to approach the record set in July 2022, when it reached 1.83 euros per litre.
A new record in gasoline prices and fuel prices, in general, is considered inevitable in the coming years as the green tax will increase annually.
According to the 2023 Carbon Tax on Energy Products Law, which was put up for public consultation, the carbon tax on motor fuels will increase from 5 cents this year to 7 cents per litre in 2025 and 10 cents in 2026, reaching 25 cents by 2033, to which VAT will also apply.
The same legislation will impose a carbon tax on industrial fuels and polluting industries, starting at 7 cents per litre this year and increasing annually until 2033.
In addition to the green tax, a public consultation was also launched for a lodging tax bill.
Following last Friday’s presentation by the University of Cyprus’s Economics Research Centre, which undertook the broader tax reform project, the bill for imposing a lodging tax was also put up for public consultation.
The bill specifies that the lodging tax, “meaning the 2.50 euro fee per room or accommodation,” will apply not only to hotel rooms but also to tourist accommodations and self-catering establishments in the Republic.
“The imposition of the said fee aims to absorb some of the negative external effects of tourism, waste management, and waste production,” the bill states.
Both bills have been posted on the government’s e-consultation platform, and the Ministry of Finance invited all interested parties to submit their views and suggestions by March 19.