Act I · YouStory 2 of 31
The tax you never see
VAT and the duties on fuel, tobacco and alcohol raise as much for the state as income tax on people and the taxes on companies put together. You pay them every day, and no bill ever arrives.
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Income tax comes with a form, a deadline and a number at the bottom. The taxes on what you buy come with nothing. They are inside the price.
Everyday purchases, each split into what the seller keeps, duties and levies, and VAT. Every bar is the full price; the figure on the right is the share that is tax.
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Fuel: European Commission weekly oil bulletin, average pump prices on 28 September 2026, with the temporarily reduced duty in force until 30 November. Cigarettes: weighted average price and duty rates from the Commission's tax database. Restaurant: VAT at 9%. Electricity: a computed two-month bill for 800 kWh on the tariff from May 2026; its levy is hatched because most of it is the estimated cost of emission allowances.
What the numbers say
Each bar is the full price of one ordinary purchase, cut into three parts: what the seller keeps, the duties and levies, and VAT.
A litre of petrol cost €1.73 on average at the end of September 2026. Of that, 37 cents was fuel duty and 28 cents was VAT. The VAT is charged on the price including the duty, so part of it is a tax on a tax. Together they are 65 cents, or 37% of what you pay.
A pack of cigarettes at the average price of €4.64 carries €2.68 of duty and 74 cents of VAT. Three quarters of the price is tax.
A restaurant bill of €50 contains €4.13 of VAT and nothing else: restaurants are taxed at 9%, not the standard 19%.
An electricity bill is harder. The VAT is small, because household electricity has been taxed at 5% since May 2026. But the bill also carries the cost of the emission allowances the power stations must buy. Statisticians class that cost with taxes, though it is not paid to the Cyprus state as such: the Electricity Authority buys allowances on a Europe-wide market, and the state earns a smaller sum from selling its own. Count it, and about 28% of a typical bill is tax. Leave it out, and it is about 6%. We can only estimate that part, which is why it is hatched.
Add up every purchase in the country and these taxes are very large. In 2024 VAT raised €3.17 billion and the duties on fuel, tobacco and alcohol another €0.56 billion. Income tax on people and the taxes on companies, together, raised about the same.
What it means for you
How much VAT you pay depends on what you buy, because the rate is not the same on everything.
| Rate | What it applies to |
|---|---|
| 19% | Most goods and services |
| 9% | Restaurants, hotels, taxis |
| 5% | Food, water, medicines; household electricity until March 2027 |
| 3% | Books and newspapers |
| 0% | Nappies and feminine hygiene products; fresh fruit, vegetables and baby milk until the end of 2027; meat, fish, poultry, bread, milk and dairy, coffee, sugar and baby food from 12 October 2026 to 31 May 2027 |
Across everything a typical household buys, we estimate that VAT and duties come to about 12% of what it spends. That is the figure the salary tool uses.
These taxes fall on spending, not on income. A household that has to spend everything it earns pays them on all of its income. A household that saves a third of its income pays them on two thirds. That is why taxes on spending take a larger share from smaller incomes, even when the rate looks the same for everyone. Duties make the difference wider: by our estimate fuel, tobacco and alcohol duty takes about twice as large a share of spending from the lowest-income fifth of households as from the highest.
What people argue
Should essentials be taxed at all? One side wants VAT removed from basic goods when prices rise, and the government has done so more than once: on 30 September 2026 it announced zero VAT on meat, fish, poultry, bread, milk and dairy, coffee, sugar and baby food from 12 October 2026 to 31 May 2027, and kept fruit, vegetables and baby milk at zero for all of 2027. The other side argues that a cut in VAT helps everyone who buys bread, rich and poor alike, that shops do not always pass it on, and that the same money given directly to low-income households would help them more.
Which side convinces you?
Should essentials be taxed at all?
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Should fuel be taxed more, or less? Fuel duty has been cut temporarily, by seven cents a litre, until the end of November 2026. At the full rate the tax share of a litre of petrol would be 40%. At the same time Cyprus has committed to its European partners to tax fuel according to the carbon it emits, and has postponed doing so because of prices. Cheaper fuel now and greener taxes later pull in opposite directions, and the argument is about which comes first.
Which side convinces you?
Should fuel be taxed more, or less?
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How we know
Fuel prices and their tax content are from the European Commission's weekly oil bulletin for 28 September 2026, which reports the pump price with and without tax. The cigarette figures use the weighted average price and the duty rates in the Commission's tax database. VAT rates are from the VAT Law as in force in 2026.
The electricity bill is our own calculation for a household using 800 kilowatt-hours in two months, on the tariff in force from May 2026 and the fuel adjustment for bills read in October 2026. The cost of emission allowances in it is our estimate of about seven cents per kilowatt-hour for that bill: since May 2026 the Electricity Authority publishes only the part carried by the fuel adjustment, and we scaled it up to the whole fuel price. The last full published figure was the 2025 average, 5.8 cents, in The carbon bill.
The 12% figure, and the comparison between income groups, are estimates from the European household budget survey, whose figures for Cyprus are several years old. The zero VAT on basic goods from October 2026 and its extension through 2027 are from the Ministry of Finance's announcement of the Cabinet's package of 30 September 2026; we have not seen the decree.
Corrected on 3 October 2026. An earlier version said the cost of emission allowances in an electricity bill goes to the state. The Electricity Authority buys allowances on a Europe-wide market; the state earns a smaller sum from selling its own.