TRNC government reverts decision to increase VAT following public outcry

The TRNC government has backtracked on its decision to increase VAT rates on many products, including basic consumer goods following public backlash. 

In a statement published in today’s issue of the Official Gazette, the Ministry of Finance announced that the matter will be discussed and consulted with all stakeholders.

The statement is as follows:

"The Value Added Tax Rate (Amendment) Regulation, published under Annex III, A.E.1121 in the Official Gazette No. 269, dated December 28, 2024, has been withdrawn. Consultations will be conducted with all stakeholders. The previous arrangements regarding the Value Added Tax rates will remain in effect. This is announced to the public and all relevant parties."

The TRNC government had on Monday announced plans to raise value added tax (VAT) rate on a total of 54 products, before making the u-turn within hours, and just hours before the new rates were set to be implemented at the start of the new year.

The rate hikes would have seen a five per cent VAT rate levied on basic products such as bulgur wheat, rice, pasta, dairy products, baby food, meat, poultry, fish, eggs, vegetables and olive oil, all of which are currently sold in the north without VAT.

Additionally, the VAT rate on products including soap, shampoo, toilet roll, white goods and products sold in coffee shops and restaurants would have been raised from five per cent to 10 per cent.

The TRNC’s restaurateurs’ association warned that the tax rises would have “disastrous consequences”, saying they would “impoverish the people” and cause the north’s tourism sector to “collapse”.

“Tourists from the Greek Cypriot side and people from abroad living here have started to leave the country due to the high cost of living and economic instability,” they added, saying that the tax rises and the loss of custom would drive the sector to “bankruptcy”.

Tuesday’s swift about turn on VAT rates is the second major u-turn the north’s ‘government’ has made in the space of a week.