The impact of zero-VAT prices on household budgets is under scrutiny, as the Consumers Association reports increases in some basic goods despite the tax relief measure. Commerce Minister Michalis Damianou says the measure is being implemented to a large extent, while the Consumer Protection Service continues its checks.
The debate comes as the cost of living remains a major concern in Cyprus. Annual harmonised inflation reached 5.2% in September, placing the country among the five EU member states with the highest rates.
Minister says zero-VAT measure is largely being implemented
Speaking before the House of Representatives Commerce Committee on Monday, during the presentation of his ministry’s budget, Damianou said the government had introduced the maximum tax reductions possible within the limits set by the European Union.
On fuel prices, the minister said the Finance Ministry had exhausted the available scope for tax cuts. Further relief would require pressure on the EU to allow additional reductions, a process he described as time-consuming.
Regarding zero-VAT prices, Damianou said the Consumer Protection Service had been recording supermarket prices since the proposal was submitted to the Cabinet. The data would be reviewed to determine whether the tax reduction had been passed on to consumers.
“This is something the Consumer Protection Service is currently working on,” he said.
The minister added that the available evidence suggested the measure was being implemented to a large extent.
Supermarkets that fail to cut prices could be named
Damianou acknowledged that the authorities’ options would be limited if supermarkets had failed to apply the corresponding price reductions.
In such cases, he said, the authorities could publish the name of the supermarket concerned.
“Most appear to have proceeded with the reductions. We will be able to comment once we have completed the checks,” he said.
The final assessment will depend on the results of the ongoing inspections.
Consumers Association reports price increases
The Cyprus Consumers Association has criticised the authorities over what it describes as inadequate market inspections and a lack of action to ensure that consumers benefit from the tax relief.
According to the association’s survey, prices for eight products increased by between one and seven cents before the zero-VAT measure came into effect.
The survey also found that some products became more expensive after implementation, rather than recording the expected reduction. Three days after the measure took effect, the association identified three products whose prices had risen by between two and four cents.
The average price reduction also fell short of the expected 5%. According to the association, average prices declined by 3.76% on the first day, 4.3% on the second day and 4.5% on the third day.
Consumers Association accuses authorities of inaction
Speaking on Sigma’s Protoselido programme on 19 October, Consumers Association president Marios Drousiotis accused the Consumer Protection Service of presenting an overly positive picture of developments in both the fuel and food markets.
He questioned why the service had collected prices four days after the measure was introduced, arguing that checks should have started on the first day, as the association’s own survey had done.
Drousiotis also accused the state of failing to ensure that financial relief and subsidies reached the consumers they were intended to support.
“The state is indifferent. It gives us the impression that announcements are made for communication purposes, without any concern about whether the money reaches those who should receive it,” he said.
He added that the association was concerned about what he described as the ineffectiveness of the Consumer Protection Service.
Cyprus among EU countries with highest inflation
The dispute over zero-VAT prices comes as inflation continues to put pressure on households.
Cyprus recorded an annual harmonised inflation rate of 5.2% in September, the fifth-highest rate in the European Union, alongside Luxembourg.
According to the Statistical Service, the largest annual increases between September 2025 and September 2026 were recorded in energy and transport.
The figures showed the following price changes:
- Energy: +20%
- Transport: +13%
- Restaurants and accommodation services: +11%
- Housing, water, electricity, gas and other fuels: +9.5%
- Services: +7%
- Food and non-alcoholic beverages: +4%
By contrast, clothing and footwear prices fell by 10.4% compared with September 2025.
With official inspections still under way, the findings of the Consumer Protection Service are expected to provide a clearer picture of whether the zero-VAT measure has delivered the intended savings to consumers.
Also read: Construction material prices rise in Cyprus
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