When news came that Greece was going to default on its debts to the EU, many wondered whether the Greeks would end up leaving the Eurozone – and indeed the euro – behind. There was even speculation that the country would reclaim its drachma and end up offering low-priced holidays to people from other countries because of the sharp difference in exchange rates.
Now news of changes to the rate of VAT have led to worries that things could go in the opposite direction. These proposals could change the holiday industry in Greece as we know it – both for Greeks who run such establishments and for the Brits who visit them each year.
According to news reports the current rate of tax on Greek accommodation is 6.5%. Tax on food you’d enjoy in Greek restaurants is 13%. If the proposed changes go ahead, 6.5% will be doubled to 13% and the tax on food would go up by 10% to 23%.
And that’s not all. The VAT rate in use for the popular Aegean Islands is currently 30% lower than it could be. There is talk this could be removed. Needless to say, a VAT rate that high could be catastrophic for Greeks who own businesses in this area, not to mention for Brits who are hoping for cheap holidays to support the Greeks in their time of crisis.
Four years ago, in 2011, VAT rates were increased by much the same amount. There have been plenty of fluctuations during the years when Greece has been in financial troubles. However back in 2011 over 4,000 businesses were lost due to the increases in VAT. Some 40,000 people were thought to have lost their jobs as a result. There is already a high rate of unemployment in Greece. The rise in VAT could well make the country’s problems worse still if the same happens again – as indeed it could.
And where would this get the government anyway? The loss of so many businesses and jobs would mean less VAT would be collected. Tourism is a major industry – if not the major industry and source of revenue – for Greece. Many would ask whether it is really worth staying in the EU and the euro if this is the outcome. Many might ask why they were given a vote on the situation anyway if they are ‘rewarded’ with this type of action.
Nothing has yet been decided upon but it looks increasingly like Greeks will suffer the most whatever happens. In addition many Brits who would usually go to Greece or the Greek islands may hang back on booking anything in case the situation worsens in the coming days and weeks. Although it is hard to imagine how much worse it could get.