Keravnos: green taxes won’t hurt

Finance Minister Makis Keravnos on Friday played down the potential cost of the green transition for consumers, saying the extra taxes would not pose a threat to households and businesses but people also needed to “change their behaviours”, he said.

Keravnos also indirectly confirmed that the current fuel tax subsidy designed to offset higher energy prices, was about to come to an end.

In statements on the sidelines of a meeting on integrated tax reform with the University of Cyprus, which has been compiling ongoing reports and computer models on the coming changes, Keravnos said: “The tax reform will be fiscally neutral. We cannot solve one problem and create another.”

The green taxation was coming soon but he could not say exactly when.

Computer models, he said, showed that green taxes would only cost the most vulnerable households in Cyprus an extra €48 a year because they would receive state subsidies. He did not reveal what the models showed for those not included in the vulnerable categories.

As the move to reach Net Zero by 2050 progresses, in Cyprus via the EU-funded Recovery and Resilience Plan ‘Cyprus Tomorrow’, a 1,000-page tome, information on the cost to the public of the green taxes is coming out in dribs and drabs from the government. The plan includes a slew of green taxes and mandatory energy upgrading of private homes and businesses for which only part will be covered by grants and the remainder by households themselves.

“There will be no serious threats to households and businesses from the upcoming green taxation, according to economic models analysed by the University of Cyprus,” Keravnos said.

He added that the main conclusions from the computer models is that “there must be some taxes related to the green transition to tackle climate change and move towards a clean environment that improves the quality of life”.

He said the computer modelling also “sent the message that the behaviour of citizens and consumers and the culture of the country should be changed”, to bring about a successful transition across the board. This echoed the Cyprus Tomorrow plan that says: “An important challenge is to drive behavioural change towards sustainable mobility solutions by motivating environmentally beneficial commuting habits or increasing costs for negatively impacting behaviours.”

Keravnos said that there will be more meetings on the issue and that the tax reform programme is going ahead “exactly as planned”.

Asked about the last extension to the fuel subsidy, which was extended by parliament in the early hours of Friday until March 31, Keravnos said it would be coming to an end based on the European Commission’s recommendations, and those of the IMF.

“We, as a member state of the EU, must operate within the European framework,” he said.

At the same time, he said at the moment Cyprus is one of the three EU countries with the lowest prices for both unleaded petrol and diesel.

“Based on the data so far, horizontal measures should be abolished and we should stick to targeted measures,” he said.

Issues related to the fluctuating price of fuel could also be addressed by the green transition with electric cars, hybrids, and the generous subsidies for their purchase.

“This is the path we must follow. It is the European road, which is the environmentally friendly road,” he said.