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Greek Island Authorities Up In Arms Over Proposed End of Special Tax Status

Photo © Region of South Aegean

Photo © Region of South Aegean

Local authorities of the Region of South Aegean decided over the weekend to take action following reports that the government was planning to axe reduced VAT rates that apply on the Greek islands.

Under the initiative of South Aegean Prefect George Hadjimarkou and the Chamber of the Cyclades, representatives from professional sectors expressed their concern and stressed that the special tax status of the islands was non-negotiable.

Photo © Maria Theofanopoulou

Photo © Maria Theofanopoulou

The Chamber of the Cyclades, representing 17,000 island businesses, announced in a statement that it is wholeheartedly supporting the local authorities’ decision and believes that such a development would have disastrous consequences on island economies and business viability.

The Chamber stressed that the special tax status on the islands is justified as it offsets the negative effects of inaccessibility, which include an increased cost of living, lack of basic health, educational and social welfare services, poor transport infrastructure and cuts in EU funding.

According to the Chamber, inspectors from Greece’s EU/IMF lenders said the decision to do away with the reduced VAT rates on the islands would bring in 347 million euros to Greek coffers; a figure, which the Chamber claims is far from real terms.

The Chamber said that it will take action against the decision and called on the finance ministry, through an October letter to Finance minister Gikas Hardouvelis, to uphold the Greek government’s position and not give into pressure.

The island authorities underline that a decision for a uniform tax status will inevitably lead to the further deterioration of living standards for island residents and stressed that besides the major tourist destinations, Greece’s island community also includes a large number of remote islands facing serious unemployment and survival problems.

Should the International Monetary Fund proposal be implemented, products and services offered on the islands would incur increased VAT rates from 9 percent to 13 percent and 16% to 23 percent.

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