ESIN

European Small Islands Federation

VAT problems for small islands in Greece

Kast-111

In Greece, islands have had a lower VAT for a long time. Now, the deal between Greece and its lenders means, among other things, that VAT rate will be raised for many goods and services. General sales tax in Greece is 23%, on hotel nights and some groceries 13% or 6.5%. For islands, the VATs have long been discounted by 30% to 16%, and also lower VAT: 6% or 3%.

The reason for this has been to support residents and tourism and to somewhat offset the additional costs of transports to islands. These subsidies will now be reduced in different degree for different islands. Only the smallest and most distant will keep their support.

When left-party Syriza won the Greek election and joined the small right-wing nationalist party Independent Greeks to form the government in January, they promised to keep rebates on the VAT for the islands. Syriza says they cannot keep their promise while the Independent Greeks promise to give it a fight. The government has cracked and new elections are promised to 20 September.

The VAT issue is not just about money. It is the country’s efforts to keep islands populated and among them, the islands under the Turkish border. Islands and islanders errs are important for the Greek cultural identity. Depopulation leaves empty communities becoming anonymous tourist ghettos.

The Greek island organizations are very upset. They consider the tax reform a blow to the islanders, not only to the tourism industry. Higher VAT makes it more expensive to live on an island – especially for those with low income or pension.

The new law cuts the islands into four: the first category is the Ionian Islands, Crete, Aegina and Hydra. They have never had rebates on VAT and will continue so. The second category includes most of the bigger Aegean islands, such as Santorini and Mykonos. They will lose their 30% discount on VAT from October 2015. A third category is the smaller Aegean islands that will lose their rebate as of June 2016. The fourth category includes the smallest and most remote islands.

– ”A small island is an island with just one hotel”, says Eleftherios Kechagioglou, president of the Hellenic Small Islands Network who is the Greek member of ESIN. The definition is true for Kastelorizo, very small and remote, easternmost of all Greek island. This is where ESIN will hold its 2015 annual general meeting on 22-24 September. By then, elections will be over and we will maybe now if the very small islands such as Kastelorizo may keep their rebates unchanged.

Bengt Almkvist, Chairman of ESIN

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