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 >  Greek holidays  >  VAT hike for Greek Islands

VAT rise for some Greek Islands

- by Andy Cornish

Cheap rates for holiday visitors to the Greek islands will be a thing of the past after VAT rates are hiked up to the levels paid in the rest of Greece.

From October 1st, the Greek Islands are to lose tax privileges that they have enjoyed for years, meaning higher prices for tourist visitors.

Rhodes, Santorini, Mykonos, Naxos, Paros and Skiathos will be the first Greek islands that will lose a special low VAT status, according to the Greek Finance Ministry.

VAT rates on those islands will rise from the current low levels of 5%, 9% and 16% to the same rates at the Greek mainland of 6%, 13% and 23%.

Other islands will follow in June next year with the remaining islands, those more remote and less visited by tourists will see taxes rise on January 1st, 2017.

The Greek Islands have benefitted from low tax regimes for years, a decision taken by the Greek government to boost tourism revenues and to help offset the higher costs of transporting goods to and from the mainland.

The lower tax rates meant lower prices for food, accommodation and other tourism related services on scores of Greek holiday islands.

But the dire state of the Greek economy and the demands imposed by creditors for repeated bailouts of the country's economy has forced the government to raise cash wherever it can.

Harmonising the country's VAT rates has been part of a new multi-billion euro new bailout accepted by the Greek government last July along with measures to be taken against tax evasion and to improve the tax collection system.

Greek hotel owners are likely to be hit the hardest as deals with tourism agencies for 2016 have already been signed and sealed. Greek hoteliers may have to absorb the extra tax next year and hope to recover their losses the year after.

At least the tax hike comes as Greece is enjoyed another record year for visitor numbers. The total number of international arrivals s forecast to pass 26 million this year bringing €15.5 billion by the end of the holiday season.

Now accounting for nearly 20% of Greece's gross domestic product, key government figures are determined to develop and improve the sector.

Greek Alternate Tourism Minister Elena Kountoura said at a recent World Tourism Conference: "It's our duty to upgrade our tourism product in regards to its quality, infrastructure, education and offered services."

Andreas Andreadis, head of the Greek Tourism Confederation (SETE) added : "Tourism has managed over the years of the crisis to be the main driver of GDP growth and has contributed to the creation of new jobs."

And president of the Hellenic Federation of Hoteliers Yiannis Retsos said: "For Greece, and especially in this environment of deep crisis, tourism has proven in the most clear way that it is a valuable pillar of economic growth and social cohesion."

Greece and the Greek Islands attracted almost 12 million tourists over the first seven months of 2015, according to figures from the Bank of Greece.

The number of inbound travellers to Greece from January to July was by 14.2% higher than the same period last year at 11.97 million.

And visitors from the UK look set to topple Germans from the top spot as revenues from British holiday visitors rose 37.2% against holiday spending by visitors from Germany with rose only 9.8%.

British visitors to Greece outnumbered Germans for the first time in 10 years at over 1.3 million, up nearly 30% this year while German holidaymakers trailed behind at 1.29 million.

The number of Russian visitors to Greece plunged a massive 65% to just to 235,000, although this was largely offset by the big increase in US visitors, up 34.8% to 395,000.