Products, services move places in new VAT plan

 Gov?t expects to raise revenues by 1-1.35 bln euros per annum

By Prokopis Hatzinikolaou

The government?s latest plan for the reform of value-added tax rates will merely be an amendment of the draft that former Finance Minister Gikas Hardouvelis had penned. Sources say that the new scenario that the Greek side has presented to its creditors provides for the maintenance of the three existing rates (6.5, 13 and 23 percent) but with the transfer of products and services from lower to higher rates.

The aim is to increase VAT takings by between 1 and 1.35 billion euros per year, and it appears that the 30 percent discount applying to many Aegean islands will be abolished.

The Hardouvelis draft had provided for the preservation of the three rates and of the Aegean island discount along with internal adjustments in the tourism sector: Hotel accommodation would carry a 13 percent VAT rate instead of the current 6.5 percent.

The SYRIZA-led government?s new plan includes the transfer of tourism services to the 13 percent bracket, the abolition of the island discount, the transfer to the 23 percent bracket of standardized food and possibly food service, without excluding further small changes that would lead to an increase in revenues.

Therefore, the very low rate of 6.5 percent would apply only to drugs, books and theater performances, while the low rate of 13 percent would concern basic food commodities (mainly fresh products), hotels, newspapers, electrical energy and water. The high rate of 23 percent is seen applying to all other products and services, likely including food service.

The benefit from the internal adjustments is expected to amount to 288.5 million euros from the abolition of the island discount, 350 million from...