Minister Varoufakis Pledges Not to Raise VAT on Greek Islands This Tourism Season

Mykonos.

Finance Minister Yanis Varoufakis gave assurance on Thursday that there will be no increase of the Value Added Tax (VAT) rate for the Greek islands amid this year’s tourism season, local press reports said.

“We have stated that we will not tolerate any VAT increase for the islands amid the summer season… There will be absolutely no change until September,” he said in Parliament while responding to a question posed by New Democracy MP Emmanouil Konsolas.

Mr. Varoufakis revealed that the government has received “very strong pressures” from the country’s lenders to increase the VAT rate on the islands. He said that Greek Prime Minister Alexis Tsipras even “had to spend much time explaining to Chancellor Angela Merkel what a VAT increase would mean for the Greek islands.”

The finance minister also said that while tourism numbers doubled last year on islands such as Mykonos and Santorini, revenue from VAT collection from these islands dropped. “This is a scandal”, he said.

He added that any change to the taxation system of the Greek islands will be imposed after September.

In regards to a reform under discussion that seeks to introduce a three to five percent luxury tax per night on accommodation in Greek hotels, Mr. Varoufakis said that it exclusively concerns hotels and resorts of high category.

“I am not announcing that this reform will take place”, he said.

It is noted that the VAT rate 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.