Greece’s Axed Special Island Tax Status Causes Stir

Symi Island in the Dodecanese.

Greek tourism sector professionals and regional authorities are calling for the government to re-examine its decision in regards to the abolition of reduced value-added-tax (VAT) rates for 27 Northeast Aegean and Dodecanese islands as of January 1, 2018.

Ikaria Island, Northeast Aegean.

In an announcement, South Aegean Region Governor Giorgos Hadjimarkos harshly described the decision as “irrational, inhumane and hypocritical”, adding that it will not bring in expected economic results while at the same time fails to protect the rights of vulnerable communities.

On its part, the Hellenic Federation of Hoteliers (POX) said the decision is a “blow to the hotel industry threatening the competitiveness of the islands’ tourist product and impacting local economies”. In a letter to Finance Minister Euclid Tsakalotos, POX cited data revealing that the abolition of the special tax status applicable until now on the islands will not generate the estimated revenue.

Five Greek islands keep special tax status for 6 months

Chios Island, Eastern Aegean.

The measure initially involved 32 Greek islands, until the finance ministry recently announced that five Aegean islands affected by refugee flows — Lesvos, Chios, Samos, Kos and Leros — would retain the current special tax status through to June 2018. The ministry also said that islanders on the 27 islands that will lose the special VAT status as of 2018, by the end of the year will be granted an extraordinary social compensation on the basis of social and economic criteria.

Greek Tourism Confederation (SETE) President Yiannis Retsos implied that the six-month extension for the five islands does not make a difference, considering that it is before tourism’s high season.

“Prolonging reduced VAT rates on five islands until June 30, 2018, means the tourist season is not included,” Retsos said via his twitter account.

Backing Retsos’ claims, Christiana Kalogirou, governor of the North Aegean Region, underlined that “no measure or regulation can offset the serious negative consequences on the economic and social life of our islands”, adding that “temporary solutions as well as the promise of compensatory allowances not only fail to solve the problem, but rather exacerbate it”.