The first week of a five-month trial in Greece of cutting the Value Added Tax (VAT) from 23 to 13 percent on food services such as restaurants and tavernas isn’t going well, with 92-95 of the eateries not reducing their prices and apparently keeping the profits for themselves, putting in jeopardy already whether the reduction will last.
Prime Minister Antonis Samaras warned ahead of the Aug. 1 beginning of the reduced VAT, designed to help an already-record tourist season, that if there was low compliance that the tax would shoot back up again but most restaurant owners have ignored him, initial records showed.
Food outlets that have reduced their prices to reflect the drop in VAT are a distinct minority, with the adjustment ranging between 5 and 8 percent at best. Outlets that have implemented price reductions display a blue sticker signalling their compliance with the measure in Greek and in English.
Over 7,000 business have already applied for the sign, according to the Hellenic Confederation of Professionals, Craftsmen and Merchants (GSEVEE.) The compliance signs, which will be in Greek and English, will only be issued if the business can prove that they have lowered their prices by at least 5% on three quarters of the items on their existing menu.
The government is now waiting to hear reactions from major restaurant and hotel chains, though sector professionals insist that the industry had already absorbed the VAT hikes applied in previous years and may not be able to offer any further discounts now.
There was also rampant confusion over how the lower VAT would be applied. Excluded from the new rates is food served so-called entertainment centres such as bouzoukia, alcoholic drinks, non-alcoholic drinks if delivered and goods consumed from hotel room minibars.
For example, an orange juice ordered with food in a fastfood shop will be charged 13% VAT. But if the same product is ordered from home and delivered, then 23% VAT will be applied.
Hotel operators were also unsure what to do and if drinks would be served at the new reduced rates if ordered through room service and delivered by a waiter, but at the previous, higher rate if taken from the minibar in the same room.
In real terms, the VAT reduction should amount to approximately an 8% reduction in the final retail price, but only if the savings are passed on instead of kept. The changes will result in minor savings in hotel stays and all-inclusive packages.
For bed and breakfast, 5% of the basic price is subject to 13% VAT because of the breakfast served. For half board: 15% of the basic price is subject to 13% VAT because of the breakfast and lunch provided. For full-board accommodation, a quarter of the basic price is subject to 13% VAT because of the breakfast and two meals served
In all-inclusive deals, 65% of the basic price will be subject to a 6.5% VAT rate, covering the cost of accommodation; a quarter will be subject to the reduced rate of VAT (13%), covering the catering services; and 10% will be charged the standard 23% rate for the consumption of alcoholic or nonalcoholic drinks and other goods included in the package.
Consumer groups have advised customers to check that the end price is the same as the one advertised and to always demand a receipt.
See all the latest news from Greece and the world at Greekreporter.com. Contact our newsroom to report an update or send your story, photos and videos. Follow GR on Google News and subscribe here to our daily email!
