Increasing VAT is no solution

A return to looting public finances – for example, by increasing VAT, a step being considered by the government – represents a step back into the past. Prime Minister Costas Karamanlis won the September 16 vote on the platform of a new ethos in government, on change and reform, and on the promise that there would be no changes to value-added tax. What then has changed? Has the government given up the fight against tax evasion, fuel smuggling and the squandering of funds in public hospitals and local government? Has it forgotten its promises to crack down on the corruption that is so rife in public services and companies? An increase in VAT rates is the easy way out, but it is also a most dangerous solution as it boosts inflation and propagates the inequitable distribution of wealth, because indirect tax hits the poorest hardest. It is, therefore, crucial that the government avoid this measure and seeks to procure the funds it needs by increasing taxes on, for example, petrol and by cracking down on the illegal trade in petrol.