Greece and IMF to clash on extension of reduced VAT rate

Fri 6th Dec 2013

The Greek government and International Monetary Fund are in dispute about a prolongation of the reduced Greek VAT rate on restaurant services of 13%.

Greek restaurant VAT at 13% till 2014

The Greek government reduced the VAT rate on restaurants from the standard VAT rate 23% to a reduced rate of 13% in August 2013.  The was with the agreement of the debt bail-out partners of the European Union, European Central Bank and International Monetary Fund.  In was only granted on the condition that it would expire automatically in January 2014, unless renewed.

The Greek government is keen to extend the VAT cut until at least the end of next summer to assist the ailing tourist industry.  However, the IMF believes there is limited evidence that such indirect tax stimuli actual produce additional economic activity to justify the loss of revenues.  The IMF estimates the Greek VAT reduction has cost up to €300 million per annum.

Portugal is currently considering a similar cut, and Ireland has extend its own tourist VAT reduction to 9%



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