Confusion reigns over tax measures

The government is trying to attach a price to a package of measures to be presented at next Monday’s Eurogroup, while various minsters’ statements on tax issues have created confusion within the country.

There was a series of meetings on Monday at the Finance Ministry, with the last one led by Deputy Prime Minister Yiannis Dragasakis, where measures were given a price tag for Finance Minister Yanis Varoufakis to present them to his counterparts at the Eurogroup. There will also be a list with other measures that will not be quantified.

However the confusion generated by government statements over tax issues does not appear to be subsiding. Value-added tax, extraordinary levies, the settlement of expired debts and so on continue to hit the local headlines as members of the government express their positions and personal views.

After statements regarding a VAT hike on some “irrelevant commodity,” and an increase on VAT for tobacco, alcoholic drinks and games of chance were later refuted by ministry sources, Varoufakis on Monday expressed his view in favor of a reduction to the top VAT rate of 23 percent to 15 or 16 percent, along with a hike in the lower rate. If this goes ahead, there will be hikes for basic commodities such as food and drugs while the prices of cars and apparel will go down.

In practice, this move would implement the plan of the International Monetary Fund for a single VAT rate through the abolition of reduced rates. That development would also see the abolition of the 30 percent discount on the VAT rates that apply on the Aegean islands.

Among the commodities that would suffer the greatest hikes are those that currently carry a 6.5 percent VAT rate – i.e. pharmaceutical products, newspapers, magazines and hotel stays. The 13 percent rate now applies to food, non-alcoholic drinks, electricity, natural gas, restaurants, cafes, public transport tickets, flowers, taxi fares, cinema tickets, private clinics, concerts and renovation services, among others.

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