Impending water tax hike on the cards

The price of water is expected to rise as part of the state’s obligation under the EU to introduce green tax reforms, it emerged on Monday.

The aim is to reshape water taxation in a way that nudges businesses and consumers to behave in environmentally friendly ways. The reforms, also set to cover fuel and waste management, include revising minimum rates and rethinking tax exemptions  for certain sectors.

In the first phase, drinking water and water used to irrigate green spaces are expected to see an increase in price, Philenews reported.

The finance ministry has reportedly been given a study by experts which includes country-specific recommendations by the 2020 European Commission for increases in water taxation.

The study recommendations would result in an increase of €0.01/cubic metre in the price of drinking water; between €0.02 to €0.23 for green space irrigation (road islands, football fields, hotel gardens, golf facilities, etc.) and a €0.02 increase for farming.

Despite the study’s recommendation to increase the price of agricultural water used for crops and livestock, the state is loath to move in this direction at present.

The water development department has meanwhile prepared a proposal to amend the regulations in place from 2017 to 2023 to streamline them with resource-use fees recommended by the EU’s green tax reform experts.

The proposed water taxation amendments were brought before the water management committee and, following approval, must be sent to the legal service for review.

After review the proposed regulations will be submitted to cabinet. Regulations are not required to be submitted to parliament.

The agriculture department is wary of price increases proposed for water used in farming, and expects strong opposition from that sector, requesting justifications to be carefully and thoroughly documented, Philenews said.

The department also asked why an environmental fee is imposed on the use of recycled water, arguing that the cost of water reclamation makes its provision a service and an act of water conservation.

Environmental costs may be assigned when urban, agricultural or industrial activities degrade the quality of water systems, such as when artificial fertilisers or pesticides enter and pollute ground water.

It can be argued that reclaimed water reduces over-extraction from other sources and slows down the depletion of aquifers.

Hoteliers, meanwhile, are asking for compensatory measures to mitigate the effects of the new proposed fees. According to the Hoteliers Association (Pasyxe), the increase in the water fee significantly burdens businesses and will have a serious impact on their competitiveness.

Bottled water companies are also facing a fee increase of 67 per cent on cost of water drawn from their own wells, which the Cyprus Water Association considers excessive.

Specifically, the supply of water to tankers, resellers and bottlers, is set to see a fee increase from €0.12 to €0.20 per cubic metre.

However, the water development department has claimed the large increase is justified by the fact that water bottlers draw water from aquifers, which are over-exploited and degraded across the island.