Greek VAT Scheme Seeking 2.4bn Euros May Take Toll on Tourism

The Greek government aims through last week’s decision to implement tax hikes across the board to bring a total of 2.4 billion euros to state coffers in the next 18 months.

Tourism, one of the country’s strongest sectors, and its relevant services, is among the mostly targeted, with taxes increasing from 3 percent to 30 percent.

Broken down, through the new stringent levy system, the government aims to bring in 160-170 million euros from the hotel sector, 200 million euros from the VAT rate increase on the islands, more than 270 million euros from the food sector — as long as receipts are issued, and 100 million euros from the transport sector, which includes ferry services to the islands.

The newly introduced value-added tax (VAT) imposed on all products and services, effective since July 20, includes a 23 percent VAT on basic goods and services, ferry tickets and food-related services. (The VAT imposed on hotels will rise to 13 percent from 6.5 percent as of October 1.)

With regard to package deals, according to the directive, a 23 percent VAT rate on food services will be calculated cumulatively from 5 percent to 30 percent on the total price of the package deal, depending on whether it includes breakfast or meals.

It should be noted that Greece is ranked fourth among EU countries with the highest VAT rates, after Hungary at 27 percent, Denmark at 25 percent and Romania at 24 percent.

Tourism industry insiders are warning that taxing the country’s leading provider may backfire as it makes Greece less competitive against other markets and fails to take into consideration the fact that incoming tourism may drop, which means that if income for Greek tourism business drops so will the government’s expected revenue.