Letter from the General Secretary of AKEL Stefanos Stefanou to the Finance Minister in relation to the imposition of green tax

 

20 April 2024

In a letter addressed to the Minister of Finance, the General Secretary of AKEL Stefanos Stefanou requests an official briefing in relation to the imposition of the green tax, reiterating AKEL’s demand for a postponement of the new flat taxes.

AKEL’s position, S.Stefanou notes, is the simultaneous discussion for compensatory measures to be taken and not the adoption of any punitive measures on society.

In his letter, the General Secretary of AKEL points out, among other things, that the commitments that were made by the previous government before the debate at a European level has even been concluded will place an even greater burden on society at a time when energy costs are not expected to de-escalate, mainly due to geopolitical developments.

The letter follows in full:

“Following the public statements of both the President of the Republic and your own regarding the Government’s decision to impose a green tax, I return to the issue to reiterate AKEL’s concerns and worries both in relation to the way the issue is being handled and the timeframes that seem to have been adopted.

First of all, I stress AKEL’s disagreement with the commitment made by the previous government and, unfortunately, adopted by the current one for the imposition of such a tax before the debate at European level has even been concluded. While the debate on the revision of the Energy Taxation Directive within the context of the Green Agreement is still at the consultation stage, in Cyprus we have proceeded to take hasty decisions before we have before us all the data regulating the new framework.

Particularly at a time when energy costs are not expected to fall, primarily due to geopolitical developments, the impact on households and businesses justifies the demand put to the European Union to at least postpone the imposition of the green tax.

Secondly, the procedure followed by the government on this matter is unconventional and problematic. Since any reform should be fiscally neutral, the discussion of taxes and compensatory measures should have been conducted together. But the government seems to be geared towards discussing taxes first and leaving compensatory measures for later. AKEL’s position is that when and provided that the issue of green taxes is discussed, they should be discussed together with compensatory measures. Otherwise, how can we ensure that the imposition of green taxes will indeed be fiscally neutral?

Given that contradictory positions have been raised in the public debate in the past period between the competent Ministries, we would like to request that we be briefed in an official manner on the following:

• What will the new green taxes to be imposed be? I recall that the Centre for Economic Studies, which was commissioned to carry out the relevant study, refers to the imposition of six new taxes and fees.
• When will the new taxes be implemented? In a letter I sent you, you noted March 31, 2024 which has now passed.
• What compensatory measures are the Government and the Ministry of Finance working on?
• What is the economic impact of the new taxes on households and businesses and what is the impact on the Cyprus economy’s growth?

In conclusion, I would like to reiterate our position that the green transition must be based primarily on the implementation of the necessary infrastructures and instruments related to transport, electricity generation, renewable energies and the handling of natural resources and not on the adoption of disincentives and punitive measures for society.”