Greek holiday islands lose VAT subsidies 1 Oct

Thu 1st Oct 2015

From 1 October, a first round of six Greek Island are set to lose their VAT rate subsidies as part of the third creditor bailout package.  The holiday islands are: Mykonos; Naxos; Paros; Rhodes; Santorini and Skiathos.  The ending of the tax subsidy will hit the cost of hotel and villa accommodation, and the prices at cafes and restaurants.

The holiday islands’ Greek VAT rates will move to the national level of 6%, 13% and 23% for the two reduced rates and standard rate, respectively.  The current, subsidised rates are: 5%; 9%; and 16%.

There was significant campaigning against the rise, with concern that it would damage the key Greek tourism industry.  But Greece’s creditors (the European Central Bank, European Commission and International Monetary Fund) made it a condition of the latest bailout. Given that the Greek tourism industry has stood up well to the recent crisis, the government had little argument against withdrawing the subsidy at the creditors’ request.  However, it may put a question mark over similar subsidies in countries like Ireland.

Greece’s Syriza-led leftist government, sworn in last week, overruled minority parties on the matter, promising a review of the measure in 2016 and a potential reversal if tax revenues were ahead of targets.  Greece was forced to raise many reduced VAT rates in August 2015.

Other islands will lose their VAT rate reductions in June 2016 and 2017.