ECONOMY

VAT incentive for credit cards

The Finance Ministry is planning to offer consumers an incentive to pay for goods and services via credit and debit cards by shaving 3 percent off the value-added tax for using plastic money to make purchases.

The aim behind the plan, which has also received the blessing of the country?s international creditors, is to stamp out the withholding of VAT by enterprises that cash it in but do not pay it to the state.

The plan provides for credit and debit card transactions to have the 23 percent VAT bracket brought down to 20 percent and the 10 percent bracket down to 10 percent.

A recent study by the Organization for Economic Cooperation and Development (OECD) showed that the state loses out on some 30 percent of VAT revenues, while the corresponding VAT evasion average in the European Union stands at just 12 percent.

Despite two consecutive VAT hikes by the government in the last couple of years, revenues from this tax have declined by 7 percent this year compared to before 2009.