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Greece’s ‘Cosmopolitan Islands’ May Lose Special Tax Status

Fira, Santorini

Fira, Santorini.

The reduced Value Added Tax (VAT) rates that apply on the Greek islands of Mykonos and Santorini may possibly be axed, according to statements made today by Alternate Finance Minister Nadia Valavani.

Little Venice, Mykonos.

Little Venice, Mykonos.

The VAT on dozens of Aegean islands — except Crete — is currently reduced by 30 percent against the current rate that applies for the rest of Greece. This regime was imposed to offset the high cost of transporting goods and to boost tourism development.

However, while speaking to Greek TV station ANT1, Ms. Valavani said that the government may charge the normal VAT rate to “cosmopolitan islands” such as Mykonos and Santorini. “What must be protected are the remote islands”, she said.

Following the alternate finance minister’s comments, local authorities of the Region of South Aegean requested an urgent meeting with Deputy Prime Minister Yiannis Dragasakis and Finance Minister Yanis Varoufakis.

In a press conference today, South Aegean Prefect George Hadjimarkos rejected the term “cosmopolitan islands” and stressed that a country’s economic policy can not be established with such criteria.

“If these islands are indeed rich and cosmopolitan, then how is it that they do not have adequate health coverage, no classrooms and adequate transportation”, he wondered.

On his part, the chairman of the Regional Union of South Aegean Municipalities, Fotis Hatzidiakos, recalled the commitment made by today’s Greek Prime Minister Alexis Tsipras when he visited Rhodes a few days before the elections in January. According to Mr. Hatzidiakos, Mr. Tsipras had assured that if elected, his government would not raise VAT rates on the islands or on tourism services.

Should the VAT hike be implemented, products and services offered on the islands in question would incur increased rates from 9 percent to 13 percent and 16 percent to 23 percent.

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