Zero VAT on essential items

The government will remove VAT on some foodstuffs to relieve households from inflationary pressures and a hike in interest rates, announced Finance Minister Makis Keravnos.

Despite March seeing the lowest inflation rate for 13 months, households continue to feel the cost-of-living pinch as they spend more on food, forcing the government to step in.

Keravnos said his ministry had prepared a list of items for which VAT will be removed entirely. The list will be tabled before the cabinet next week for approval.

Once approved, the finance minister will issue a decree to lift the VAT from several essential foodstuffs and commodities.

“This can be done based on EU directives. The list will include baby food, milk, bread, eggs, diapers for babies and adults, and women’s sanitary towels,” said Keravnos.

The decree will be valid for six months and renewed if the government finds it necessary.

“The first decree has already been prepared, and the legal services are currently assessing it. This is a short process, and it will be presented before the cabinet.”

A second list of commodities and foodstuffs for which VAT will be reduced is also being prepared.

These items will see their VAT drop from 19% to 12%, 10%, 5% and 3% accordingly.

Keravnos said that legislation does not allow for tempering with VAT on non-essential commodities, which means that a bill will need to be prepared and submitted to the House.

“This might take several weeks. Ministry technocrats are currently putting the list together, and when ready, it will first be approved by the cabinet.

“Any efforts and measures to protect citizens from intense inflationary pressures and the rising cost of living should be done within the framework of the state’s budget”.

The government hopes to ensure that any reductions in VAT will be reflected in shelf prices and not benefit retailers.

Reducing VAT on children’s items, such as food and clothing, was among President Nikos Christodoulides’ preelection commitments.

He is also committed to reducing VAT on photovoltaic systems via a government decree while increasing tax-free yearly income from EUR 19,500 to EUR 24,500.