Greek taverna taxes backfire
Archimedes: December 2012
Greek taverna taxes backfire.
A steep rise in taxes for Greek tavernas, aimed at boosting coffers for the Greek government, has badly backfired. As revenues drop and more than 4,000 tavernas close, owners across Greece and the Greek Islands are calling for tax rises to be repealed. VAT bills for Greek island tavernas nearly doubled to 23% in 2012 as part of a Government effort to raise cash.
But an estimated 40% drop in customers for tavernas and restaurants has forced many out of business.
The decision not to impose similar taxes on hotels serving food as part of all-inclusive holiday deals has left many unable to compete for the lucrative Greek holiday market.
The VAT hike drove away so many customers that tavernas slashed prices to entice more customers but to little effect and many restaurant and café owners have been forced to shut their doors.
Just as increased taxes on restaurants and bars drove down sales, a big hike in taxes on alcoholic drinks in Greece also backfired, sending tax revenues down and cutting consumption in half.
Taxes on alcoholic drinks more than doubled the price of beer and wine from 2009 levels and sent consumption tumbling from 284 million gallons in the first six months of 2009 to just 148 million gallons in the first half of 2012.
According to the Hellenic Association of Drinks Distributors (ENEAP) state revenues from drink sales from January to October 2012 totalled €224.6 million euros down from €290 million in the same period last year.
They claim the drop in consumption has cost the drinks industry some 10,000 jobs. Taxes now make up 57% of the price of beer and wine in Greece.
Tourism leaders fear the high prices will deter tourists on Greek island holidays in 2013 and see a further rise in all-inclusive packages which do little to help the Greek economy as profits rise for overseas hotel chains.
They fear small family tavernas and bars will go out of business this year as Greeks themselves face big pay cuts and higher domestic taxes.
Tourism Minister Olga Kefaloyianni has backed calls to cut the VAT of food and drink served in tavernas and bars from 23% to 13% this year in a bid to protect the Greek holiday industry.