ATHENS – Greece’s new coalition government is reportedly planning a single 18 percent Value Added Tax (VAT) and abolishing all exemptions, except for medicines.
The coalition government led by Prime Minister and Radical Left leader Alexis Tsipras had vowed to reduce taxes as one of its many campaign promises, now on the rocks.
The new rate would come into effect in the second half of the year, a European Commission official who was not identified told the newspaper Kathimerini.
It’s dependent on the approval of the troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) as it would requiring some VAT rates below the current 23 percent.
The government said it would bring in more revenues than now when there are varying rates of VAT but it would hit households harder because families and people would pay extra for basic goods, going against a SYRIZA pre-election tenet.
There will be a reduction of 5 percentage points in the 23 percent VAT rate imposed on many products and services, but also a 5 percentage-point hike for key commodities such as food, electricity, catering etc.
The special status granted to Aegean islands, with a 30 percent discount on VAT rates, will be abolished. This was originally introduced to offset the high cost of transporting commodities to the Greek islands.
The German newspaper Bild reported that other ideas on the table include cuts in supplementary pensions – breaking another campaign pledge- an end to early retirements, using privatization revenues to pay down debt, a luxury tax on island holidays and agreeing not to raise the minimum salary – breaking another campaign pledge.