South Aegean Prefect Slams Government for Abolishing Reduced VAT Rate on Greek Islands

Fira, Santorini.

South Aegean Prefect George Hatzimarkos on Thursday slammed the government for agreeing to axe the reduced value-added-tax (VAT) rates that apply on the Greek islands.

South Aegean Prefect George Hatzimarkos.

The elimination of a 30 percent VAT discount* on the Aegean islands is among the tough reforms Greece agreed to implement in return for a three-year multi-billion euro bailout.

The reforms on the VAT rates were included in an omnibus draft bill approved by Greek Parliament in the early hours of Thursday morning.

“From the dawn of Thursday, July 16, 2015, the special tax status of the Aegean islands is a thing of the past”, Mr. Hatzimarkos said, adding that the government proceeded with a “disastrous policy” to save the country, without having a plan for the “next day”.

In a statement sent to the media, the South Aegean Prefect underlined that it only took six months for the government to scrap the special tax regime “in such an immoral and politically vulgar way”, reminding that it was the government who had proposed to do away with the VAT discount to begin with.

“The gravity of the situation is nor an alibi or an excuse. The crime against the islands was premeditated. The reduced VAT rates have not been abolished by the lenders. The present government signed the (initial) text proposing their abolition in the name of ‘promoting equal rights’.”

Mr. Hatzimarkos said that the Region of South Aegean will do its duty and keep the islands and their communities “afloat” in every way and means, in spite of the “extreme and dangerous irresponsibility” shown.

Special tax status on islands to end as of October

Mykonos. Photo © Maria Theofanopoulou

According to the reforms to be implemented on Greece’s VAT system, the Aegean islands with higher incomes and which are the most popular tourist destinations — such as Santorini and Mykonos — will be the first to see the 30 percent discount on VAT rates abolished as of this October.

As of July 2016, the special tax status will end on most other Aegean islands.

Meanwhile, the discount will also be axed for the Aegean’s most remote islands, although initially it was decided that they would hold on to the special tax status indefinitely. As of January 2017, the 30 percent VAT discount on remote islands will come to an end.

A joint ministerial decision that will include a list of the islands in each category is expected soon.

* The VAT on dozens of Aegean islands — except Crete — was reduced by 30 percent against the current rate that applies for the rest of Greece. This regime was imposed to offset the high cost of transporting goods and to boost tourism development.