Greek Islands Want Return to Lower VAT Rates in View of Covid-19 Damage

Leros Island, Greece

South Aegean island authorities are calling on the Greek government to reinstate previously set value added tax (VAT) rates, which were specifically valid for a number of Greek islands, as part of efforts to mitigate the adverse economic effects of the coronavirus (Covid-19) pandemic.

Local government authorities and South Aegean Regional Governor Giorgos Hadjimarkos are urging the government to re-examine restoring the special VAT rates in view of the damages caused by the coronovairus epidemic.

“The needs that will have arisen on the next day [of the coronavirus pandemic] for local governments in the South Aegean region will be significantly increased and all available resources and tools should be managed more effectively,” said Hadjimarkos after a conference call with South Aegean island mayors over the repercussions of the Covid-19 crisis.

The abolition of the special island tax rate status – reduced by 30 percent against the rate that applies elsewhere in Greece – was a requirement of Greece’s international creditors and a condition for the country to exit its nearly 10-year bailout program in 2018.

Little Venice, Mykonos. Photo © Maria Theofanopoulou

It should be reminded, that the special tax status previously in effect on 32 Aegean islands, including Mykonos, Rhodes and Santorini, was initially introduced to offset the high cost of transporting goods and to boost tourism development.

Additional conclusions of the meeting included closer collaboration between island authorities, the implementation of additional measures to ban travel to and from the islands in efforts to contain the spread of the deadly virus in view of Orthodox Easter next week, as well as the supply of Covid-19 tests and health materials.

The island authorities are expected to re-convene in order to lay out an action plan to address the aftermath of the Covid-19 health crisis.

The reduced VAT regime is in effect on five Greek islands, namely on Leros, Lesvos, Kos, Samos and Chios, in efforts to alleviate the local economies which have borne the burden of refugee flows and seen tourism figures dwindle.