ECONOMY

VAT cut set to create number of loopholes

A circular issued on Tuesday by the Finance Ministry to clarify the application of the reduction of the value-added tax on food services appears to have made the issue more confusing. The circular confirms that the tax will decrease from 23 to 13 percent from tomorrow until December 31 at restaurants, bars, tavernas and hotels as far as food is concerned but not alcoholic drinks.

However, there are points that generate confusion for the five-month trial period: For instance, a soft drink delivered to one’s home or workplace will have a 23 percent VAT rate, but if consumed inside a restaurant the VAT will be just 13 percent. If a soft drink is taken from a hotel room minibar, the VAT rate will be 23 percent, but if room service brings it to the room it will have a 13 percent VAT rate.

The ministry estimates that final retail prices will have to come down 8.1 percent for consumers to enjoy the full benefit of the tax reduction.