EU Commission, SYRIZA clash over Private Education hike, when both sides had agreed on 23% VAT in April

The Value Added Tax of 23% was decided to be imposed on private education schools and tuition centers in August as an “equivalent measure” so that the absurd 23% V.A.T. on beef and other meats would be cancelled. Obliged to relocate revenue measures due to creditors’ fiscal targets, Greece has no space to cancel an austerity measure without replacing it with a new one. And because the V.A.T. is being considered a ‘fail-safe’ revenues bringing indirect tax,  creditors and Greece have found out it can be used as a useful tool to fill up state cash registers. Alas! The reality is much different as the V.A.T. in private education became soon very controversial, first of all because foreign private -and mostly elite’s – schools were excepted from the 23% V.A.T.

Why this VAT-exception for foreign private schools, one could never really understood. On some websites, one could read that this was because the foreign schools were registered as ‘non-profit’ organizations, despite the fact that some elite schools cash several thousands euros per child per year.

According to a government decision of 14.8.2015, foreign schools were VAT-excepted if they fulfill following criteria:

“i. their systematic aim is not to make profit and that any profit should not be distributed but assigned to the continuance or improvement of the services provided.

ii. the administration and management of these agencies should be on an essentially voluntary basis by persons who do not, either themselves or through intermediaries, direct or indirect interest in the results of the activities concerned

iii. their prices should be lower than those charged for similar commercial enterprises, which are subject to VAT,

iv. the exemption should not create a risk of distortion of competition.” (via daily Ethnos.gr)

But the V.A.T. on Greek private schools and tuition centers (frontistiria) affected thousands of ordinary Greeks,  as every child over 15 needs a tuition center to be able to pass the exams and be eligible to study at University or College.

Opposition New Democracy started to attack SYRIZA over the tax, although ND had voted in favor of the measure in the context of the “first set of prior actions” voting on July 15th 2015.

Within a couple of days, more than 200,000 people, school personnel, students, and parents had signed a petition calling for the tax to not be imposed.

With this and that and the snap elections scheduled for September 20th,  SYRIZA decided that the VAT had to be scrapped, made a quick U-turn and called on the caretaker government to suspend the 23 percent VAT rate – for now. The caretaker government followed the request and the General Secretariat of public Revenues issued a circular on Wednesday, saying that the imposition of the 23% V.A.T. in private education will freeze until October 16 2015.

The measure was supposed to be implemented as of September and was expected to raise €350 million by the end of next year.

What will happen next, nobody knows. I wonder how private schools, tuition centers and children’s parents deal with the issue awaiting until the middle of October.

SYRIZA said that it would repeal the measure if it is re-elected. How SYRIZA will cover the hole of €350 million is not known yet.

European Commission vs SYRIZA

The thing is that SYRIZA claimed that it was the creditors who had demanded the 23% V.A.T. on private education and insisted in its statement that Greece’s lenders were to blame for the unpopular measure.

However, ‘according to EU directives there is not V.A.T. on private education,’ Greek media reported.

On Tuesday, European Commission spokeswoman Annika Breidthardt said that Brussels had not asked for the tax.

“The Commission has not, indeed, asked Greece to change its legislation on VAT applicable into private schools. In fact, the MoU requirements on VAT do not contain specific provisions on VAT to private schools.”

This prompted SYRIZA to issue a statement saying:

“After the public statement of the Commission, that an increase of the VAT in education was not requested,  we (SYRIZA) request from the caretaker government to proceed with the retraction of the measure. It is a matter of top priority for thousands of households.”

Who proposed the 23% VAT in Private education?

In a document sent from Brussels to Athens on 20. April 2015, the creditors ask the Greek government respectively the Greek negotiations team to clarify the Vale Added Tax in profitable education services, in private education, that is.

I suppose, we have to take a close look into the Greek proposals to the creditors during the March – April negotiations. One has to dig further to see if it was ex Finance Minister Yanis Varoufakis and his financial team that made this and all other Value Added Tax proposals which were approved by the Troika institutions, after all.

On the other hand, Greeks have been used to listen to their governments claiming that “The Troika is to blame for all measures”. At the same time, some of us know very well, what the Troika proposed in the past and what the Greek government did in reality. I am referring here to the example of  “patients’ self-participation for prescription medicine“, a dreadful reform for thousands of people, implemented with German assistance and know-how. Too bad, that the Germans were enjoying sunny beaches and frappe at Syntagma Square and never found out how their proposed ‘reform’ was materialized. When they did, it was too late…

Conclusion: the best tactic is to blame each other and never have the guts to claim own responsibility and errors. Was the private education VAT decided after negotiations on technical teams level? Was it the idea of Varoufakis’ foreign advisers, who cannot distinguish between parsley and basil? Had PM Tsipras no idea what his finance Minister was proposing to the creditors?

It may not matter after all. Greeks pay the price, anyway.

*** List of foreign education schools and colleges – among others: American Colleges, German School, also Italian, French, Libyan, Polish, Israeli Community School and others.