Mixed results from VAT cut in catering

Consumers only benefited marginally from the value-added tax reduction in prices at food outlets last month, as according to data presented on Monday by the Hellenic Statistical Authority (ELSTAT), the price index in the Hotels-Cafes-Restaurants category declined by just 1.4 percent from July and 3 percent from August 2012.

On August 1 the VAT rate on food service went down from 23 to 13 percent, which ideally would have resulted in an 8 percent decline in final prices.

However the Development Ministry argued on Monday that the success of the VAT cut was greater than expected, given that the increase from 13 to 23 percent in September 2011 had not been passed on to consumers in most cases.

Sector professionals attribute the small drop in prices to the fact that many business owners were trying to make the most of the increased tourism traffic in a bid to secure the highest possible turnover, and for this reason avoided cutting prices last month.

ELSTAT data show that catering prices had been on the rise from before September 2011, after which the annual increase amounted up to 4.15 percent in December 2011. This was reversed from August 2012, leading to the 3 percent annual drop last month.

“The response of the market has been very rapid,” commented the general secretary for consumers, Giorgos Stergiou, who predicted a steady yearly drop of 3 to 4 percent in the coming months.

Restaurant owners counter that while there may not have been a significant price drop, the rate cut has resulted in an increase in employment and in the containment of shutdowns in the sector.

Regarding the economy as a whole, deflation grew even stronger last month as ELSTAT figures pointed on Monday to a 1.3 percent shrinking of the consumer price index compared with August 2012, driven mostly by the fall in charges for services, and not in product prices, some of which actually showed an increase.

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