Greek Prime Minister has finally gotten the country’s international lenders to agree to cut the Value Added Tax (VAT) for food services, including restaurants, hotel eateries, cafeterias and tavernas from 23 to 13 percent, which he said would help the economy during what looks to be a record-breaking tourist season.
He made the announcement in a televised address and said the new rate would begin on Aug. 1 but the higher rate would apply to other businesses who are also struggling. Restaurteurs had complained that people were staying away because of the high tax rate.
“Not only do we ward off some unpleasant issues, but we impose positive changes as well. Contrary to what some people claimed, we have achieved our goals,” he said.
And despite disappointing tax revenues, he reiterated his vow there would not be any further austerity measures nor any additional taxes on businesses, although there was no word about the proposal for a luxury tax. He said the VAT cut for restaurants represented “for the first time in a tax break,” under the regime of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) regime now in its third year.
The lenders are putting up $325 billion in two bailouts but have insisted on pay cuts, tax hikes and slashed pensions in return to make sure investors get paid back first. Even all the revenues from privatization will go repay the loans and interest.
He called on Greeks to pay their taxes at the same time the government is not aggressively pursuing tax cheats, concentrating instead on getting taxpayers who can be identified easily to pay, as well as pensioners. He said the VAT break will help not only the restaurant industry but related businesses such as suppliers and help reduce the record 26.9 percent unemployment rate, which is 64 percent for those under 25.
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