Greek islanders threaten referendum over tax

Greek islanders are threatening to hold a referendum on whether to veto proposals by the country’s international lenders to scrap a reduced rate of value added tax for the islands, a regional governor said on Tuesday.

Plans to increase VAT have been a sticking point in talks between the Greek government and its European and International Monetary Fund creditors, as the two sides try to hammer out a cash-for-reforms deal to unlock further aid. Athens argues the hike would hit tourism, its main source of revenue.

Giorgos Hatzimarkos, governor of a south Aegean cluster of islands that includes popular destinations such as Myconos and Santorini, said his region had decided to hold a referendum with the backing of Finance Minister Yanis Varoufakis.

A Finance Ministry spokesman said the two sides had met to discuss VAT rates but could not immediately confirm the details, nor what kind of legitimacy the referendum would have.

“It’s something that’s been agreed with the finance minister,” Hatzimarkos told Skai TV. “It was his idea and proposal in order to shield the government against the pressures by its lenders.”

It would take 12 to 14 days to plan the vote once the phrasing of the question was approved by the ministry, he said.