BUSINESS

VAT hike falls short of target

PROKOPIS HATZINIKOLAOU

TAGS: Finance, Taxation

The hike in the value-added tax on basic food products in 2015 did not fetch the anticipated results, as a European Commission report shows that the inflows into state coffers were far below the revenue forecasts.

The government’s decision to increase the VAT rate on those products was found to have brought additional revenue of just 200 million euros in 2015, against estimates for an extra 1 billion euros. The VAT deficit, or the gap between total annual revenues from VAT and anticipated takings, amounted to 5.08 billion euros in 2015, against 4.3 billion in 2014. The equivalent across the whole European Union in 2015 amounted to 152 billion euros.

In 2015 the government not only raised the VAT rate on many food commodities from 13 to 23 percent, it also abolished the 30 percent VAT discount on a series of islands. Fertilizers and other products were also subject to tax hikes. Still, Greece found itself among the top three EU countries in terms of VAT shortfalls, along with Slovakia and Romania.

The Commission’s report, issued on Thursday, notes that the collection of VAT revenues is showing some signs of improvement in Greece, but it added that the revenues lost remain at an unacceptably high level. “Member-states should not allow such serious revenue losses from VAT,” commented Pierre Moscovici, the European commissioner for economic and monetary affairs.

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