EUROZONE-GREECE/RESTAURANTS-VAT Greek restaurant workers opine on VAT hike plan

Record ID: 147672

  • Title: EUROZONE-GREECE/RESTAURANTS-VAT Greek restaurant workers opine on VAT hike plan
  • Date: 10th July 2015
  • Summary: ATHENS, GREECE (RECENT - JUNE 26, 2015) (REUTERS) VARIOUS OF PEOPLE WALKING AROUND CENTRAL MONASTIRAKI SQUARE/ ACROPOLIS HILL IN BACKGROUND GREEK FLAG AND TOURISTS ON ACROPOLIS HILL VARIOUS OF PEOPLE SITTING AT RESTAURANTS WOMAN RAISING HER GLASS TOURISTS EATING AT RESTAURANT VARIOUS OF RECEIPT FOR TWO KEBABS AND TWO BOTTLES OF WATER WITH CURRENT VAT RATE OF 13 PERCENT RES
  • Embargoed: 25th July 2015 13:00
  • Keywords:
  • Location: Greece
  • Country: Greece
  • Topics: General
  • Reuters ID: LVA1WO1MNOYZ9YCAKGJ55YN1IYC0
  • Aspect Ratio: 16:9
  • Story Text: Not even a week has passed since the divisive referendum in which the majority of Greeks voted to reject a tough programme of tax hikes and pensions cuts from international creditors to guarantee access to bailout funds.
    But on Friday (July 10), lawmakers were consolidating their positions and looked set to vote in favour of a strikingly similar set of proposals from the same government that called the referendum. It comes after months of fruitless wrangling with international creditors who often lost patience with Greece as it aggressively pushed back against the proposal which the prime minister described as unviable, damaging to the economy and "humiliating" to the Greek people.
    Amongst the tough measures objected to then were a VAT increase on restaurant and catering to 23 percent and a rise to 13 percent from 10 percent on basic food, hotels, water and energy Greece had originally asked for 0.38 percent increase. It also wanted to maintain the VAT exemption on some top tourist islands like Mykonos and Santorini.
    Just hours before Prime Minister Alexis Tsipras announced the referendum to reject or accept the creditors' reform package, on June 26, Evangelos Kolilas, who works in a busy Athens restaurant in the tourist district explained why he was against the measures.
    "I don't know how they will absorb this (VAT increase); will it be through worker's salaries, or by lowering prices? It's hard because businesses have a 15 percent profit now, so if you burden them with another 10 percent, how will they function? Nobody works for free. So he'll either have to shut down his shop or fire everybody," said Kolilas who works in the busy tourist district of Athens.
    On Friday (July 10), the government was pushing hard to pass the exact same increase in VAT whilst also agreeing to lift the VAT exemption on tourist islands.
    Kolilas was furious and said he felt betrayed.
    "We said 'No' and that was turned into a 'Yes'. Because the people said 'No' to austerity measures! And now they are doing a deal," Kolilas said.
    "I voted 'No'. Of course I voted 'No' against the austerity measures. Pensioners have to pay for their children, there is no money to throw a wedding or a baptism. Where will this lead us to? Taxes, taxes, taxes. What? Are we supposed to sell off everything now, with 23 percent how many tourists can we now expect?" he added.
    Although tourists had come back in large numbers this year, the imposition of capital controls at the end of the month coupled with the political uncertainty about the country's future and the risk of a total collapse of the banking system has translated in a 30 percent drop in last minute bookings in the last week. Those account for one fifth of bookings in Greece.
    The new proposals of long-term cuts to pensions as well as additional taxation that, while encouraging change in the economy overall, will have the effect of further weakening demand.
    And for tourism higher prices doesn't just mean smaller profits, the industry fears it will put people off coming to Greece.
    "Well, I think that would be unfortunate because I think it would deter tourism and maybe not have the desired results. We have been coming here with tour groups for eight years now and have seen the prices come down to a place that it's a very affordable place to go and I would hate to see them go back the other direction again," said Kelly Poulis, a school teacher from North Carolina in the US.
    The General Manager of Greek Tourism Confederation, Alexander Lamnidis, said it was unfair to tax Greece so highly. This is not in line with the basic principle of a fair and unified European Union he said.
    "When France is at 10 percent VAT and most of the countries around the area are between 8 and 10 percent - Turkey is at 8 percent, for example... We have already said that, due to the extraordinary circumstances in Greece we can go to 13 percent and accept something that is really hurting us," Lamnidis said.
    Greek banks have been closed since June 29, when capital controls were imposed and cash withdrawals rationed after the collapse of previous bailout talks. Greece defaulted on an IMF loan repayment and now faces a critical July 20 bond redemption to the ECB, which it cannot make without aid.
    The country has had two bailouts worth 240 billion euros from the eurozone and the IMF since 2010, but its economy has shrunk by a quarter, unemployment is at more than 25 percent and one in two young people are out of work.
    Greece asked for 53.5 billion euros ($59 billion) to help cover its debts until 2018, a review of primary surplus targets in the light of the sharp deterioration of its economy, and a "reprofiling" of the country's long-term debt.
    Creditors have said the reforms are absolutely necessary to get the country back on track and back into growth.
    The prime minister, who was voted on a wave of anti-austerity, may encounter trouble from those who believed he could reverse the regime of tough reforms that have decimated the country for 5 years now.
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