SETE urges FinMin to keep VAT for hotels down

The letter showed the domino effect that would occur if VAT taxes on islands were spiked

The Greek Tourism Confederation (SETE) is urging Finance Minister Yanis Varoufakis to keep VAT for hotels at current levels in a letter released by the group on Thursday. The previous conservative New Democracy and socialist PASOK coalition had already planned to raise the 6.5% VAT for hotels to 13% according to demands by Greece’s international creditors. SETE said that the fact that businesses on islands pay as much as 30% less tax than on the mainland should not be confused with the VAT for products.

SETE cited an Ernst & Young report showing that VAT hikes would harm tourism causing lower bookings and lost jobs. Though the state stood to gain 200 mln euros in the short term, from 2015-2020 the revenues would not exceed 70 mln euros per year. The cost for the tourism sector, if such a measure were to be enforced, are estimated to range from 415 million to 680 million euros in 2015. Long-term, the sector would lose 1 to 1.7 billion euros, resulting in a drop to GDP up to 1.4 percent, or 3 billion euros.

The downward spiral would also affect job positions with a VAT increase resulting in the loss of between 18,500 to 30,000 positions for the first year, while over five years job loss would involve 44,000-73,000 positions.

As an alternative, SETE urged the government to implement state controls and introduce a series of new measures to end tax evasion such as the electronic issuing of receipts or linking cash registers to the tax service forbidding cash payments beyond a certain level.

A copy of the letter was also sent to Economy, Infrastructure, Shipping and Tourism Minister George Stathakis and Alternate Ministry Tourism Elena Kountoura.