Gov't mulls introduction of uniform VAT rate next year

By Sotiris Nikas

Finance Minister Gikas Hardouvelis is examining the prospect of introducing a uniform value-added tax rate, while the reintroduction of certain tax breaks is also being considered.

However, the country’s creditor representatives have already demanded that any revisions, especially the revival of any tax breaks, be countered by measures of equal monetary worth to keep fiscal matters balanced.

German Finance Minister Wolfgang Schaeuble spelt out this need during a meeting last week with Greek Development Minister Nikos Dendias, who presented Greece’s case for lower taxes.

Some months back, Prime Minister Antonis Samaras announced his coalition’s intention to reduce certain VAT rates. Market conditions are now considered ripe for these revisions to be put into effect. According to Finance Ministry sources, various alternatives are currently being examined, the objective being to not put public revenues at risk.

The establishment of a uniform VAT rate is believed to be the main objective. Sources believe this would range between 19 and 21 percent, meaning that lower-end VAT rates would increase while higher-end VAT rates would fall.

The 6.5 percent VAT rate currently imposed on pharmaceuticals, hotel accommodation, newspapers, books and theater tickets would be jacked up as a result. Also headed for an increase would be the current 13 percent VAT rate on other necessities, such as food, non-alcoholic beverages, electricity and natural gas. The current 23 percent VAT rate on products and services such as clothing, footwear, telecommunications, furniture, cars, fuel, alcoholic beverages and real estate would decrease.

The Finance Ministry is also believed to be considering the elimination of certain exemptions, such as a 30 percent VAT discount offered on islands.

The International Monetary Fund has also called for a uniform VAT rate in recent years. The IMF has previously described the country’s VAT system as one “full of beneficial rates and exemptions that distort consumer choices.” Greece has pledged to make the VAT revisions in October and implement the changes on January 1, 2015.