VAT Hike Puts A Damper On Greek Tourism

The government’s effort to solve Greece’s fiscal problems will not be successful if not accompanied by measures to support tourism, President of the Association of Greek Tourism Enterprises (SETE) Nikos Angelopoulos recently said in a letter to Finance Minister Yiorgos Papakonstantinou.

On 3 March the Greek government announced a series of strict revenue-boosting measures aimed at reducing Greece’s double-digit deficit. The measures included hikes to income taxes and to the Value Added Tax (VAT).

The standard VAT rate has now increased from 19 percent to 21 percent and the reduced nine percent rate, charged to certain businesses including restaurants and hotels, has now risen to 10 percent.

“The world of tourism supports the necessary economic measures announced by the government, no matter how tough they are… But these measures will not be successful if tourism is not supported,” SETE’s president said.

Mr. Angelopoulos underlined that along with the VAT increase, tourism businesses also have to deal with additional costs such as the reactivation of the levy payable under Law 128/75 and the increase of the interest rates of loans. (The tourism support measures announced last year by former Prime Minister Kostas Karamanlis allowed tourism businesses not to pay the surcharge under Law 128/75 on loans for a year.)

SETE’s president underlined the necessity for the government to adopt measures that would support tourism’s economy and therefore boost the national economy.

On its part, the Hellenic Association of Travel and Tourist Agencies (HATTA) pointed out that many of Greece’s rival destinations have maintained low VAT rates on tourism services as a measure to address the global economic crisis.

“But Greek businesses are literally urged to absorb the additional costs (that result from the VAT increase), something that will put pressure on their own sustainability,” HATTA told GTP.

The association said the government has the tourism sector’s support but must draw up a series of measures to support entrepreneurship and tourism growth.

“Our economy needs Greek tourism, which could easily be a growth lever with concrete and considerable results,” HATTA concluded.

The Hellenic Chamber of Hotels announced it supports the measures taken by the Greek government to cut the country’s double-digit deficit but is against the increase of VAT rates.

“The rise in VAT rates significan tly affects tourism businesses and further aggravates our tourism product’s competitiveness in the world market and will eventually cause loss of revenue, which will eventually hit the national economy,” the chamber said.

According to the chamber, the government must move beyond the restrictive measures and support the Greek tourism product, which apart from the crisis itself has been significantly affected by the negative global climate caused by the country’s economic performance.

The chamber requested the abolition of the cabotage law in Greece, the improvement of shipping links and the formation of a new aviation strategy that would see low cost flights to Greece on an eight-month and 12-month basis.

Additionally, some time before the government announced the austerity measures, the Athens-Attica Hoteliers Association had referred to a possible VAT hike as a “catastrophic move” for the sector at a time when other European states are lowering VAT rates in tourism.

Similarly, the Hellenic Federation of Hotels had said it is “inconceivable” that in a time when Greece’s competitors within the euro zone maintain the VAT on low levels, for Greece to discuss VAT increases for hotel businesses.

“Such developments contradict promises made by Prime Minister Yiorgos Papandreou on 18 February 2009 (when PASOK was still the main opposition party) in regards to VAT reduction for tourism businesses,” the federation had said.