Gentlemen’s agreement on VAT drop

The government signed on Friday the decision for the reduction of value-added tax in catering from 23 to 13 percent as of August 1 on a trial basis for five months, although it accepts that the benefits for those actually paying for such services will likely be marginal.

Mathematically, the VAT drop in food servicing should entail an 8.1 percent decline in prices at restaurants, bars tavernas etc, however, because to date the VAT hike had been absorbed by the enterprises themselves, consumers can expect at best a reduction of 5 percent, while about one in four catering commodities will likely see no reduction at all.

The agreement sealed yesterday by the ministries of Finance, Development and Tourism with associations of sector professionals provides for catering enterprises that reduce their prices by 5 percent to display a special blue sticker showing their compliance, although up to a quarter of their menu may be exempt from the reduction.

The agreement says that the government has recognized the sector’s efforts to contain prices during a period when the VAT on food services was on a level with that of luxury goods. The obligation for the 5 percent price drop does not apply to alcoholic drinks as the VAT cut does not concern them. In their new menus, restaurateurs will have to include prices both before and after the reduction.

The pact further incorporates incentives for enterprises to pass on the reduction to their customers, such as giving them priority in European and national support programs for as long as the agreement is valid. Participating enterprises will be listed on the Development Ministry’s official website as well as those of their sector’s associations. The state will also recommend enterprises participating in the price reduction agreement to any public agency that organizes functions.

Meanwhile, the Finance Ministry is also planning to clamp down on companies that do not issue receipts. Minister Yannis Stournaras stated that in the next few days he will announce a package of measures against tax evasion that will go as far as shutting down stores that fail to issue receipts. “We will take all necessary measures to ensure that state revenues [do not suffer as a result of the non-issue of receipts]. The framework will be strict,” he said.

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