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Greek Islands get summer VAT tax hike

Greek island holidays look set to get more expensive this year, on some of the islands anyway.

The Greek government has scrapped a VAT rate discount enjoyed by several Greek holiday islands while at the same time raising the overall tax rate by 1% to 24%, one of the highest in Europe.

Greek islands that have lost their VAT rate discounts this month are Syros, Thassos, Andros, Tinos, Karpathos, Milos, Skyros, Alonnisos, Kea, Antiparos and Sifnos.

These islands have enjoyed a lower tax rate than mainland Greece to compensate both for the high cost of food imports and to help the islands boost holiday tourism rates with lower prices in shops and tavernas.

Now they must pay the same 24% rate as the rest of Greece on a broad range of goods and services that will affect supermarkets, petrol station, gift shops, clothes boutiques and tavernas.

These are not the only Greek islands have escaped VAT rises. Similar discounts were lost on the islands of Santorini, Mykonos, Naxos, Paros, Rhodes and Skiathos in October last year.

Even more remote Greek islands can expect the same treatment next year and be forced to revert to the nationwide rates of 6, 13 and 24% that applies to the rest of Greece.

It is all part of the demands by the EU and the IMF for Greece to get its finances in shape after billions of euros in bailouts.

The Greek VAT rate was once the lowest in the European Union at 19% but now will join countries with highest VAT rates such as Denmark, Croatia, Sweden, Finland´s and Hungary.

For holiday visits to the Greek islands this year it will almost certainly mean higher prices in shops and tavernas, as well as higher fares on Greek island ferries and higher petrol costs for those using hire cars.

Drivers will be hit harder with a special tax on fuel of around five cents per litre for petrol and eight cents a litre for diesel.

The VAT rise is forecast to generate between €400m and €500m to help plug a gap in the 2017-18 budget and help avoid a potential VAT increase in domestic electricity, water and in private education.

The Greek Confederation of Commerce argues that the sixth VAT hike in as many years will depress sales by 3%, increase levels of tax evasion and hurt businesses already struggling to survive the government's austerity measures.

Economists said the tax increase would depress sales initially, but the policy was necessary to shore up the economy in the longer term.

In any event, expect to pay more on your Greek islands holiday this year as the government still struggles to reshape the Greek economy.

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