VAT cut on catering draws ever closer

The government and its creditors are close to an agreement on the reduction of the value-added tax on food service from 23 percent to 13 percent as of August 1, according to sources.

Talks between the Finance Ministry and representatives of the International Monetary Fund, the European Commission and the European Central Bank – known as the troika – are likely to reach a successful conclusion in the coming days, allowing the government to fulfill one of its election pledges: that tax measures taken in recent years will be eased if fiscal conditions in Greece allow it.

Technical experts of the troika and of the ministry have spent the past few days examining the details of the VAT cut in catering, and it is said that they are considering implementing the reduction for four to six months at first, until it becomes clear whether the measure will bear fruit or not. The idea is to monitor the effect of the measure on a monthly basis by looking at the revenues collected and whether consumption has risen or not in order to determine whether cutting the VAT on food service will improve the financial sentiment in the market and lead to better fiscal results. The monthly results will determine when the test period is going to end and whether the reduced rate will become permanent or not.

The key point may well prove to be whether the reduction will reach customers, which is why the government is considering forcing restaurateurs to cite on menus their prices before and after the rate cut. However, sector professionals say that since they had absorbed the VAT rise in their prices, they do not intend to make any discounts now.The issue will be discussed with the heads of the troika when they return to Athens for their next review on September 9. If the rate cut applies from August 1, data from the first month of the measure will be available for examination.

Bloomberg cited an anonymous European Union official on Tuesday saying that the Euro Working Group will hold a conference call next Wednesday to discuss the next bailout tranche, amounting to 2.5 billion euros to be released later this month.

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