Our View: VAT relief was a temporary measure that ran its course

It was inevitable that Akel would start protesting as soon as it became known that that government would not extend the duration of the measures that were implemented to help people cope with the rising prices. The zero VAT on a dozen essential products will end on September 30, while the discount on electricity bills be scrapped from November 1. Their duration had been extended in the past because people had opposed their ending, but it is very doubtful the government would do this again.

The finance ministry said the inflation rate was expected to stabilise at 2 per cent, a rate that did not justify the continuation of these measures. In July it was recorded at 2.1 per cent and in August at 1.5 per cent, a downward trend that could not justify keeping the measures in place any longer. The ministry announcement was preceded, 24 hours earlier, by the release of a report on price movements by the Consumer Protection Service which found an increase in the price of 18 goods and a decrease in the price of 25 goods over a month.

This was adequate justification for Akel to attack the Christodoulides government because “it had no idea what the large majority of society was suffering because of high prices.” There was no other explanation for “the unacceptable decision to scrap the only measures that existed to support society in dealing with expensiveness,” it said, dismissing the government’s justification as “problematic.” The finance ministry’s announcement said that benefits and pensions were adjusted in line with the Cost-of-Living Allowance (CoLA), which was also incorporated in wages thus helping people deal with higher prices.

Considering that less than a third of private sector workers receive CoLA it was not a very convincing argument by the ministry, which, in a way, showed that its primary concern was the welfare of the public employees. And as Akel pointed out there were benefits such as the minimum guaranteed income that remained unchanged regardless of the soaring prices in the last couple of years; it also pointed out that most people on the minimum wage were not entitled to CoLA.

On the surface, these are reasonable points, but inflation is not tackled by scrapping VAT on 11 basic products such as milk, eggs and nappies, nor are living standards safeguarded. The measures were aimed at showing people that the government was doing something about high prices to help people. Prices, however, continued to rise, and the scrapping of 5 per cent VAT on these items made little difference to people’s disposable income. And it will make no difference once VAT is imposed again.

Akel knows this, but its protest is part of its ongoing effort to pose as the defender of low-income groups. And the government is providing it with ammunition by coming up with unnecessary justification for scrapping the measures. After all the measures were sold as temporary relief in a period of high inflation that no longer exists. This is all the government had to say instead of taking an apologetic approach and bringing up CoLA.