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V.A.T. hikes on rich Greek islands like Rhodes, Mykonos, Santorini

Alea jacta est. The Value Added Tax die is cast for the richest Greek islands that attract millions of tourists each year. Mykonos, Santorini, Paros, Naxos, Milos, Syros and Tinos are reportedly on the list prepared by the Greek Finance Ministry that will abolish the low V.A.T. rates. So far, the V.A.T. hike refers to islands on the Aegean Sea, while the rich islands on the Ionian Sea seem to be exempted.

As of October 1st, the Value Added Tax on these islands which is decreased by 30% will belong to history.

With the implementation of the revenues bringing measure, the Value Added Taxes on these islands will rise from rates of 5%, 9% and 16% today to 6%, 13% and 23%, that is the same as on the Greek mainland.

The lenders’ prior action will go into effect through a legislative act instead of a ministerial decision.

The measure will go into effect in three stages: the first stage will affect the so-called “nearby and rich islands” as mentioned above. The second will go into effect on 1. June 2016 and the third on 1. January 2017.

According to Greek media, there is possibility that more islands will be include on the list scheduled for October 1st. The legislative act is expected to be issued on Monday, September 28th 2015.

Scrapping the lower V.A.T. on the island was in fact scheduled to be implemented as on end of July, however local business organizations and associations protested it claiming it will hurt the tourism industry and the summer revenues.

On October 1st the mercy period for the first group of islands will be over.

I tend to not agree with Value Added Tax hikes for the simple reason that it burdens horizontally all groups of the society, whether vulnerable or not. But if one considers the notorious tax evasion on the touristic islands, especially conducted by restaurant and consumption businesses, the V.A.T. hikes seems to be a correct measure. In checks conducted in the months of July and August, the Financial Crime Units (SDOE) found not only fake cash registers but also manipulated cash registers that showed lower than the real revenues and therefore the businessmen paid less V.A.T. to the state.

Unless these sneaky businessmen and -women find other ways to keep pocketing tax money.

PS the tax evasion mentality can change only when some people digest that they can’t live on the cost of the others.

UPDATE:  Sept 27th 2015

The Finance Ministry announced the final list of the islands where the reduced V.A.T. will be scrapped as of 1. October 2015.

The islands are: Rhodes, Skiathos, Mykonos, Santorini, Naxos, Paros

According to this list, Syros, Tinos and Milos are been excluded from the original plan as on KTG’s post from Sept 25th that was based on Greek media reports.

I suppose these six islands will save Greece’s debt and make huge contribution to obligations to lenders….

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  1. A small correction if i may.. the Ionian Islands have never had lower / special VAT rates. Now the playing field will be leveled as it should.

    • Giaourti Giaourtaki

      So why not make a bonus for the Ionian islands NOW? If people are poorer there it would be just.
      It should be made easier for normal working class people to live on islands and not the other way round as this will lead to empty the islands. What should next? In Athens, the same rents like in Munich? Or first vat hikes for the islands in Spain, Portugal and Italy that suffered oh so much from the Greek discount? Who had this idea? Portugal and Spain!

  2. I agree with you in a way, KTG. But, considering the current state of affairs, that money won’t go back to the Greek people but to the coffers of the troika lenders, so the hike is an abuse. Tax the rich, who have a much more established way of dealing with tax evasion than some local hotels. I also believe the fake or manipulated cash registers are a consequence of the crisis and not directly linked to some ‘bad habit’, although I won’t deny I’ve been reading a lot about the tax evasion bent of Greece. Nonetheless, unless there are true social measures that will uplift the living conditions of the people, most measures passed from now on will be to the profit of European lenders.
    Equality should not be enforced this way, especially on the key resource for Greek economy, tourism. That there should be better controlling methods for tax collection is indeed true, but I doubt this will be accepted mildly.

    • I agree with you too. Make a fair taxation system, change mentality.

    • Giaourti Giaourtaki

      No Greek tax evasion can ever compete with the worldchampion in corruption Germoney, not only 2 billion to bribe in Greece but also 11 million manipulated cars that will lead to cheated tax up a trillion but this is just normal as fraud is a typical German mentality since the Reichskassenschein.

      • come on, it’s only 11 million manipulated cars with good intention :p

        • Giaourti Giaourtaki

          Making the health-care system sustainable via mass-murder by exhaust? I can’t wait to see the next nobel-prize for medicine as thousands of doctors now can understand hundreds of thousands unexplained deaths.

  3. a very painful but necessary step the government creates this by ignoring it human nature being what it is will adopted to it in time

  4. It will give Greeks a chance to kick back & relax.
    It costs more in cleaning up, than the money spent by tourists.

  5. In Portugal, we still have a week of “grace period” until next 4th October (election day).
    About who will benefit from over taxation, the national friends of Troika found an amazing name: extraordinary contribution of social solidarity.

    • you’re late. we got 3 ‘extraordinary” taxes in 2010 – in fact practical implementation as of 2011: solidarity tax, trade fee and the additional property tax. All three were supposed for 2 years. They are still valid and will be till the end of the Greek days

    • BTW: the extraordinary for social solidarity in GR was supposed to go the unemployed. how exactly I don’t know. Anyway it never went where it was supposed to go , in landed in the state Treasury and form there it disappeared to fill up financial holes. I assume, Portugal just copy pasted the GR EXTRAORD Social SOLI success :p

  6. Is there any reason for the islands to have lower VAT? Surely yes. All goods not produced locally are already overpriced by the transportation costs. In the Portuguese Atlantic islands and despite the Troyka claims, lower VAT is still in effect on the islands. So why the same reason is not holding in the Greek islands? I can only understand as a punishment for the hope spread by Syriza all over Europe in the beginning of this year. European Union institutions are trying hard to postpone the day of unavoidable decompression of the huge social tensions they are creating everywhere.

    • people asked here same question: why in GR but not in Portugal or Spain. Fact is that when revenues are missed form one measure then “equivalent measures” have t be found

    • Giaourti Giaourtaki

      It’s simply corporate imperialism, a capitalist conspiracy called “German Megali Idea” (Big Plan) as “rich” islands are expensive to live already. So with every person who will be forced to relocate from the islands the chances are getting better to have new hotels for the new tourists landing on German state-run airports (Frankfurt Subways).
      This is also the reason for the propaganda regarding the “missing” Greek “land-register” as every German kid knows that all these olive-trees are owned by Nikos Omerta & Kostas Vendetta and if you can’t prove to Mafia Troika ownership because you don’t have the money to travel from Athens… but, hey, even if you can prove … as bad paid or unemployed you will sell cheap to Tui Neckerman …
      The islands close to Turkish shores still have discount because they will get “developed” and in a few years tourists can jump from German hotels on Greek islands with hotel-owned ferries to German run hotels in Turkey and visit the Turkish run Greek ruins. One thing is for sure, no Greeks will work in this Disneyland any more unless they don’t have a German passport, are unemployed and get forced to work for one Euro and later we’ll see so many heartbreaking media-fartz about lucky unemployed from Germoney living in their paradise and then you all will remember the German saying “Greece is so wonderful, but it would be so much better without Greeks”
      The only one who can help now is Turkey; some one must tell’em about Megali Idea…