Government Decision Bolsters Household Incomes Amid Rising Energy Costs
The Greek government has decided to extend the reduced Value-Added Tax (VAT) rate on electricity for households until March 31, 2027. The decision was approved during a recent cabinet session as part of continued efforts to ease financial pressure on consumers.
Rationale Behind The Measure
Following the meeting, Finance Minister Makis Keravnos stated that the reduced VAT rate had originally been set to expire on March 31, 2026. However, with electricity prices remaining broadly in line with last year’s levels, the government opted to prolong the measure for an additional year. The move is intended to help households manage their monthly expenses against the backdrop of persistently high energy costs.
The extension is expected to cost the state approximately €40 million. Officials describe it as part of a wider strategy to cushion the impact of energy prices and strengthen disposable income for families. Maintaining the lower VAT rate is seen as a stabilising step during a period of ongoing economic uncertainty.
Cyprus Government Surplus Rises To €1.61 Billion In First Nine Months Of 2026
Cyprus recorded a general government surplus of €1.61 billion in the first nine months of 2026, equal to 4.0% of gross domestic product, as revenue growth outpaced the rise in public spending. Higher receipts from income taxes, social contributions and value-added tax (VAT) drove the improvement, while lower capital expenditure helped restrain spending.
Preliminary figures released Tuesday by the Statistical Service of Cyprus show the surplus rose to €1.17 billion, or 3.0% of GDP, up from € 442.1 million in the same period of 2025.
Total government revenue increased 6.5% to €12.09 billion, while expenditure rose 2.9% to €10.48 billion.
Key Fiscal Measure
January–September 2025
January–September 2026
Total revenue
€11,353.9 million
€12,091.8 million
Total expenditure
€10,186.2 million
€10,482.1 million
Government surplus
€1,167.6 million
€1,609.7 million
Surplus as a share of GDP
3.0%
4.0%
Income Taxes And VAT Lead Revenue Growth
Taxes on income and wealth made the largest contribution to the increase in revenue. Receipts in this category climbed by €442.2 million, or 15.3%, to €3.34 billion, compared with €2.89 billion a year earlier.
Social contributions rose by €235 million, or 6.6%, to €3.78 billion. Taxes on production and imports increased by €251.5 million, or 7.2%, reaching €3.77 billion.
Net VAT receipts, after refunds, totalled €2.64 billion, up €293.1 million, or 12.5%, from €2.35 billion in the first nine months of 2025.
Some Revenue Streams Decline
Not all revenue categories moved higher. Capital transfers fell by €74.6 million to €96.7 million, while current transfers declined by €71.6 million, or 20.5%, to €278.2 million.
Revenue from services slipped 1.0% to €743.5 million. Interest and dividend receipts dropped by €37 million, or 28.6%, to €92.4 million.
Social Benefits And Personnel Costs Increase
On the expenditure side, social benefits rose by €199.6 million, or 4.9%, to €4.27 billion. Compensation of employees—which includes imputed social contributions and public-sector pensions—increased by €108.3 million, or 3.8%, to €2.99 billion.
Intermediate consumption, covering goods and services used in the delivery of public services, rose by €114.3 million, or 11.0%, to €1.16 billion. Interest payments increased by €8.7 million, or 2.6%, to €340.7 million. Current transfers were up €68.7 million, or 10.6%, at €714.7 million.
Lower Capital Spending Limits Expenditure Growth
The overall increase in spending was tempered by a decline in capital expenditure. Capital-account spending fell by €189.9 million, or 16.9%, to €936.2 million from €1.13 billion in the same period last year.
Investment in fixed capital declined by €94.1 million, or 12.1%, to €686.4 million. Other capital transfers fell by €95.8 million, or 27.7%, to €249.8 million. Subsidies also decreased, dropping by €13.9 million, or 15.5%, to €75.8 million.
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