Cyprus plans to cut the tax on heating fuel to buffer consumers with minimal energy options from high prices of crude on world markets, the island’s finance minister said yesterday.
The move will cost the state an estimated 10 million Cyprus pounds ($24.3 million) and is an addition to a social spending package worth an estimated 111.4 million Cyprus pounds announced by authorities in July.
“The government could not remain indifferent to the situation evolving on international markets, and this move was permissible in terms of our fiscal situation,” Finance Minister Michalis Sarris said.
The move only applies to tax on heating fuel, which will fall to 7.3 cents a liter from 11.3 cents. Cuts in heating bills had been a longstanding demand of residents of mountain regions.
Oil prices have fallen since hitting a record high of $83.90 a barrel last Thursday, fueled by worries of a US Gulf storm that later fizzled, the weakening US dollar and a cut in key US interest rates.
Cypriot authorities had introduced a one-off cut in heating tax in 2005, but Sarris said the new arrangement would be permanent. “Our taxes are generally lower than many other countries in the European Union,” he said.
The government, which faces general elections in February, has in recent years slashed deficits by tighter controls on spending and revenue to shore up the economy for eurozone admission in January.
It forecasts a budget deficit of 1 percent of gross domestic product in 2007, and expects to halve that in 2008.
Cyprus is heavily reliant on fossil fuels for its energy needs, with power generation from renewable sources of energy less than 1 percent of total production.
(Reuters)