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Mixed Results from VAT Cut in Catering

greekfoodfestival175124Greek consumers only benefited marginally from the value-added tax reduction in prices at food outlets last month, as according to data presented on Monday by the Hellenic Statistical Authority (ELSTAT), the price index in the Hotels-Cafes-Restaurants category declined by just 1.4% from July and 3% from August 2012.
On August 1 the VAT rate on food service went down from 23% to 13%, which ideally would have resulted in an 8% decline in final prices. However the Development Ministry argued on Monday that the success of the VAT cut was greater than expected, given that the increase from 13% to 23% in September 2011 had not been passed on to consumers in most cases.
ELSTAT data show that catering prices had been on the rise from before September 2011, after which the annual increase amounted up to 4.15% in December 2011.
This was reversed from August 2012, leading to the 3% annual drop last month. Regarding the economy as a whole, deflation grew even stronger last month as ELSTAT figures pointed on Monday to a 1.3% shrinking of the consumer price index compared with August 2012, driven mostly by the fall in charges for services, and not in product prices, some of which actually showed an increase.
(source: ANSA, ELSTAT)

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