VAT hike on the islands is back on the table

The issue of value-added tax on popular Aegean islands has returned to the spotlight as despite the strong denial by the prime minister’s office of an increase in the rate, also citing legal problems, the government spokesman returned to the subject on Monday, telling radio station Real FM that “this is a topic that is in open consultation.”

He did note, however, that the government has definitely not submitted such a proposal to its creditors and their negotiators (known as the Brussels Group).

Should a decision be made to raise VAT rates on certain Aegean islands, all commodities and services would be taxed on the rates applying in the rest of the country. That means that on islands such as Myconos and Rhodes the rates would go up from 5, 9 or 16 percent today, depending on the commodity, to 6.5, 13 and 23 percent respectively.

The loss of revenues from the reduced rates on the Aegean islands is estimated at 347 million euros per year for state coffers. Finance Ministry officials say that the adjustment of the VAT rate on the popular islands alone could fetch additional revenues of over 200 million euros per annum.

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