Greek PM: A VAT Hike On Tourism is Irrational

Raising the Value Added Tax (VAT) on restaurants and tourism is irrational, Greek Prime Minister Alexis Tsipras said on Tuesday night during an interview to state broadcaster ERT.

The VAT hikes are among the tough reforms Greece agreed to implement in return for a three-year multi-billion euro bailout, following marathon talks with eurozone leaders that ended early Monday morning.

During the interview to ERT, PM Tsipras said that the deal was an alternative to a disorderly bankruptcy.

Greece will increase the VAT on restaurants and catering from the current 13 percent to 23 percent, while hotels will see the VAT rise from 6.5 percent to 13 percent.

The reforms to be implemented on Greece’s VAT system also include the elimination of the current (30 percent) discount* on the Aegean islands, starting with the islands with higher incomes and which are the most popular tourist destinations.

The new VAT rates on Greek hotels and islands are expected be implemented from October 1, 2015.

The Hellenic Parliament will vote on Wednesday to pass legislation to implement the measures agreed in Brussels.

* The VAT rate for dozens of Aegean islands 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.