The competent authorities are rushing to implement water taxation due to Cyprus’ obligation to comply with the Green Tax Reform.
Initially, the cost is expected to be borne by users of drinking water as well as those who use water for irrigating green spaces.
The government is leaning towards not imposing taxes on irrigation water for agricultural purposes, despite recommendations from a special study by experts delivered to the Ministry of Finance, which includes suggestions to address Cyprus’ challenges and comply with the European Commission’s country-specific recommendations for 2020.
Regarding water resource management, the study suggests increasing the environmental and resource levy, resulting in a price increase of €0.01 per cubic meter for drinking water, €0.02 for irrigation water for agricultural purposes, and €0.02 to €0.23 per cubic meter for irrigation water for green spaces (such as islands, football fields, hotel gardens, golf courses, etc.).
Following the experts’ recommendations, the Ministry of Finance has called on the Ministry of Agriculture, Rural Development, and Environment to consider, as a first step, increasing only the water supply and irrigation levy for green spaces.
The Water Development Department (WDD) has prepared a proposal to amend the Unified Water Management (Rights, Fees, or Other Financial Considerations) Regulations from 2017 to 2023 to implement the environmental and resource levy recommended by the Green Tax Reform experts.
Increases are proposed in the following categories:
(a) Supply of drinking water from government waterworks/government water supply systems to water suppliers – levy increase by €0.01 per cubic meter,
(b) Supply of drinking water from sources outside government waterworks (wells, springs, rivers) – levy increase by €0.01 per cubic meter,
(c) Supply of fresh untreated irrigation water from government waterworks/government irrigation networks for irrigation of football fields, green spaces – levy increase by €0.06 per cubic meter,
(d) Receipt of irrigation water outside government waterworks (wells) for irrigation of football fields, islands, parks, green spaces, hotel gardens, golf courses, etc. – levy increase by €0.02 per cubic meter up to €0.23 per cubic meter,
(e) Supply of recycled water for irrigation of football fields, islands, parks, green spaces, hotel gardens, golf courses, etc. – levy increase by €0.06 per cubic meter up to €0.08 per cubic meter.
Water taxation was presented to the Water Management Advisory Committee (WMAC), and after the committee’s approval of the regulations, they must be sent to the Legal Service for legal review, and the proposed fees must be sent to the Technical Committee for the Determination and Revision of Fees and Rights for approval.
Subsequently, the proposed Regulations must be submitted to the Council of Ministers for approval for publication in the Official Gazette of the Republic.
The Regulations do not need to be submitted to the House of Representatives for approval.
The Ministry of Agriculture is cautious about the magnitude of the increase, as the next stage may be an increase in the levy for irrigation water for agricultural purposes.
Therefore, it considers it important that the calculation of the increase is properly documented because there will be justified reactions from farmers.
The Department of Agriculture questions why there is an environmental levy in the calculation of the fee for the use of reclaimed water, considering that the use of reclaimed water itself constitutes an environmental action.
Based on billing regulations and cost recovery mechanisms for water services, reclaimed (recycled) water is considered a water service.
Therefore, when there is an environmental cost or a resource cost, it should be attributed to reclaimed water, just like other services.
In general, an environmental cost arises when uses (urban, agricultural, etc.) degrade water systems qualitatively and thus create environmental damage. As a water service, reclaimed water provides water for irrigation use (mainly) and thus contributes to environmental damage. That’s why it incurs an environmental cost.
The resource cost arises from the overexploitation of underground aquifers by water services, which degrades them quantitatively.
The reclaimed water service does not extract from anywhere. On the contrary, it contributes to reducing overexploitation by other services (such as agriculture, for example).
Hoteliers are seeking compensatory measures for the new proposed fees for water supply and irrigation of green spaces. According to the Cyprus Hotels Association, the increase in water fees significantly burdens businesses, including hotel units, and will have a serious impact on their competitiveness.
Hoteliers are hoping for the provision of compensatory measures to mitigate costs in the hotel industry, as water usage is an essential product offered to customers, and the planned increase cannot be passed on to customers because the sector faces competitive markets.
For the irrigation of private football fields and sports grounds, as well as private green spaces and hotel gardens with fresh untreated water from government irrigation networks, the proposed increase is 16.7%, from €0.36 to €0.42 per cubic meter.
For water intake from drilling for the irrigation of private green spaces and hotel gardens and houses, the fee doubles from €0.10 to €0.20. For golf course irrigation from surface sources – licensed private reservoirs, the fee increases from €0.11 to €0.22, while for golf course irrigation from wells enriched with recycled water, the fee increases from €0.23 to €0.46.
For the irrigation of private football fields and sports grounds, as well as private green spaces, gardens, and houses with recycled water, the charge increases from €0.17 to €0.23, representing a 35.29% increase, and for golf course irrigation from €0.23 to €0.31, representing a 34.78% increase.
The proposed 67% increase in the fee that bottled water producers must pay per ton of water they extract from their own wells is deemed excessive by the Cyprus Bottled Water Association, while the Water Development Department highlights that the percentage increase in the fee is significant because bottled water producers extract water from underground aquifers, which have been classified as degraded in our country.
Specifically, for water supply to water resellers by tanker/truck for bottling, the fees increase from €0.12 to €0.20, and the same fees apply from WDD to sellers of drinking water by tank, to bottled water producers, or for other uses of drinking water.
