Yes to furlough, no to VAT cut

Finance Ministry to expand measure of contract suspension, but won’t alter tax rates

Yes to furlough, no to VAT cut

The Finance Ministry has ruled out any reductions to value-added tax rates on commodities, but it is expanding the measure of furloughs in accordance with the extension of restrictions against the pandemic that the government confirmed on Wednesday.

After bars, clubs and other enterprises directly affected by the midnight closure order and the ban on music, which have been extended to January 23, the measure of contract suspension will expand to food service, albeit with a ceiling of 25% of staff, according to a ministry source.

More sectors will also join the scheme, such as gyms and culture, along with enterprises that are not formally part of night-time entertainment but are dependent on it.

Decisions on that matter are set to be announced immediately, as the ministry is ready for it, without any horizontal interventions given that any support must be granted in a sensible way.

This is also why Minister Christos Staikouras hastened on Wednesday to dampen any hopes of a VAT reduction for a number of basic commodities in the face of product price hikes, given that the fiscal cost would have been huge.

Speaking on Parapolitika FM radio, Staikouras stressed that “we are at the start of the year, with great uncertainties and major challenges ahead of us on the fronts of inflation and the health crisis, as well as the field of monetary policy and the formation of the fiscal rules as of 2023; therefore we cannot derail the execution of the budget from January. Sensibility is required, so there is no prospect at this time for any reduction in VAT rates.”

A ministry source seconded on Wednesday that it would not even be certain that a VAT rate cut would reach the final retail prices and benefit consumers.

The government has pinned its hopes for the support of workers’ incomes not only on the tax breaks already in force but also on the increase of the minimum wage, handouts through the furlough scheme and the subsidizing of electricity bills.

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