VAT cut becomes permanent
Budget to extend the reduction of value-added tax for key commodities for at least 6 months
The final draft of the 2024 state budget will be tabled in Parliament on Tuesday and include an extension for six months, until the end of June, of the low value-added tax rate of 13% for self-serve coffee and taxis, making it permanent for transport, tour packages, gyms and cinema and theater tickets and restoring the high VAT rate of 24% on soft drinks served (not water).
The Ministry of National Economy and Finance, fearing the increase in prices for the products and services in question in an inflationary environment, recommended that the budget takes over the fiscal costs of this intervention, even though the general tendency and the recommendation of the European Commission is to withdraw the support measures from the pandemic and energy crisis.
The good performance of the budget, which systematically overperforms, contributed to this decision. The cost, however, is anything but negligible, since it amounts to some 400 million euros, sources say.
This comes on top of the permanent measures that have already been passed and will be implemented in 2024, amounting to €1.6 billion. These concern salary increases for civil servants, increases in pensions, an increase in the tax exemption for families with children, a reduction in the ENFIA property tax for insured homes and the exemption of former EKAS beneficiaries from participating in the cost of purchasing medicines.
The budget will also provide additional revenue compared to the draft, thanks to the anti-tax evasion measures that will be passed. According to Minister Kostis Hatzidakis, the relevant resources will be allocated to the increase in spending on health and education.
Despite these interventions, the same sources report there will be only marginal changes in the remaining budget figures. According to analysts, there is a possibility the final result will be better than the forecast 1.1% of GDP. For 2024, the target of the draft budget is for a primary surplus of 2.1%, while last week the Commission in its fall forecasts placed it at 2.5%.
