Market structure, tourism and European budget are the three keys for which the VAT In Greece, it will not be reduced by continuing to supply accuracy, at least another decade, according to well -informed sources on newsit.gr.
The same sources note that in other developed economies the tax blend is distributed about 50-50 between VAT and income tax, while in Greece the scales are in favor of indirect taxes by 2 to 1. From there it begins and the debate ends, as the fund does not “go out”.
More specifically, the reasons why VAT rates in Greece will remain high are three.
O first reasonand better known as it is often repeated by the financial staff, is that the reduction will not go to the final price of the product payable by the consumer, as the business would get it. Especially in Greece of incomplete competition, such a move would lead to the loss of revenue and at the same prices “on the shelf”, as no control mechanism can guarantee a 1-2% price reduction (that is, as much as a VAT reduction).
The second reason It’s about tourism. Greece welcomes about 35-40 million visitors a year. They consume goods and services here, without being taxed on income tax (opening the revenue gap between direct and indirect taxes). VAT is essentially the mechanism by which the state taxes tourism consumption. Market structure (many small companies with a concentrated, local character and limited capabilities for scale economies, that is, high cost per unit) makes operating costs disproportionate and does not allow large price reductions. Because no different VAT can be imposed on the 40%or 50%tourist only, the general rate remains high for everyone, at 24%. If it is reduced, then there is a great loss of revenue from tourism spending, that is, one of the main supports of the Greek economy.
The third reason It concerns the EU and Greece’s participation in the Community budget. According to the same sources, Greece contributes about 1.7 billion euros to it, as it receives about 6 billion euros, and reminds that during the pandemic the country’s GDP has dipped and even more European funds began to arrive. A VAT reduction would lead to a shrinking tax base that supplies the common budget while Greece continues to receive multiple amounts, as VAT resources are one of the key components on which national entries in the Community “piggy bank” are based.
Therefore, a brave VAT reduction is difficult to stand politically and fiscal against the partners. Indeed, as the same sources point out, the data will not change for Greece for at least a decade.