Tax evasion in Greece threatened to take organised form on Thursday when café and restaurant owners refused to pay a 10-point VAT rise, as a deep recession clashes with the government’s increasingly desperate search for revenue.
The steep rise in value added tax on the hospitality sector from 13 per cent to 23 per cent is part of a package of fiscal measures agreed in return for the country’s second financial rescue by European Union partners.
But for many of Greece’s ubiquitous cafés and souvlaki stands, which have already seen a 20-40 per cent decline in business in the past year as customers rein in spending, the VAT rise is the final straw.
“Our members voted at an extraordinary general assembly not to pay the increase because it will drive many establishments out of business,” said the PanHellenic Federation of Restaurants and Related Professions, representing more than 15,000 hospitality businesses.
Sete, an association of Greek hoteliers and tour operators, said the tax rise was “inappropriate, unjust and will not produce the revenues it targets”.
The measure is projected to raise €750m ($1,072m) over the next year, according to the finance ministry, which says owners will be fined for tax evasion if they fail to pay VAT at the increased rate.
The restaurateurs’ reaction highlights the desperation of Greece’s small business community amid the worst recession in memory. The economy is set to shrink this year by more than 5 per cent and by another 2 per cent in 2012, according to finance ministry projections.
Grigoris Dimitropoulos, owner of a café on Adrianou, a pedestrian street close to the Acropolis, called the increase “totally unfair”, given that VAT was raised from 9 per cent to 13 per cent less than a year ago.
“Last year, hospitality traders in central Athens absorbed the full increase, even though it meant a big cut in profits. This time, if we are eventually forced to pay up, we’ll have to raise prices,” Mr Dimitropoulos said.
The government agreed the latest VAT increase in June under pressure from EU and International Monetary Fund experts, after the budget showed a revenue shortfall of €2.1bn in the first four months.
The finance ministry postponed implementing the measure until September to avoid impacting businesses during the peak tourist season. It has also exempted cafés and bars at tourist resorts offering all-inclusive packages from paying the extra VAT – a move that has upset hospitality operators on the Greek islands.
“All-inclusive tourism has already undermined the local café and restaurant trade because it discourages visitors from spending money in the nearby village. This measure is another blow,” said Spyros Kandoulis, a café-owner on the island of Corfu. Evangelos Venizelos, the finance minister, said this week he planned to reverse the increase when an overhaul of the country’s tax administration, backed by the EU and IMF, was completed next year.
Stavros Argyropoulos, another Athens café owner, was sceptical that a VAT increase could be withdrawn or that a boycott on payment would go unpunished. He said he was hoping to reduce overheads to avoid raising prices.
“Our sector will go on being squeezed because it’s a cash cow – Greeks won’t stop drinking coffee and tourists will always want a local meal,” he said. “But coffee is already expensive by European standards and I can’t charge €10 for a Greek salad.”
By Kerin Hope taken from http://www.ft.com/cms/s/0/5a6e2be6-d4aa-11e0-a7ac-00144feab49a.html#axzz1Wno7JgIq
The steep rise in value added tax on the hospitality sector from 13 per cent to 23 per cent is part of a package of fiscal measures agreed in return for the country’s second financial rescue by European Union partners.
But for many of Greece’s ubiquitous cafés and souvlaki stands, which have already seen a 20-40 per cent decline in business in the past year as customers rein in spending, the VAT rise is the final straw.
“Our members voted at an extraordinary general assembly not to pay the increase because it will drive many establishments out of business,” said the PanHellenic Federation of Restaurants and Related Professions, representing more than 15,000 hospitality businesses.
Sete, an association of Greek hoteliers and tour operators, said the tax rise was “inappropriate, unjust and will not produce the revenues it targets”.
The measure is projected to raise €750m ($1,072m) over the next year, according to the finance ministry, which says owners will be fined for tax evasion if they fail to pay VAT at the increased rate.
The restaurateurs’ reaction highlights the desperation of Greece’s small business community amid the worst recession in memory. The economy is set to shrink this year by more than 5 per cent and by another 2 per cent in 2012, according to finance ministry projections.
Grigoris Dimitropoulos, owner of a café on Adrianou, a pedestrian street close to the Acropolis, called the increase “totally unfair”, given that VAT was raised from 9 per cent to 13 per cent less than a year ago.
“Last year, hospitality traders in central Athens absorbed the full increase, even though it meant a big cut in profits. This time, if we are eventually forced to pay up, we’ll have to raise prices,” Mr Dimitropoulos said.
The government agreed the latest VAT increase in June under pressure from EU and International Monetary Fund experts, after the budget showed a revenue shortfall of €2.1bn in the first four months.
The finance ministry postponed implementing the measure until September to avoid impacting businesses during the peak tourist season. It has also exempted cafés and bars at tourist resorts offering all-inclusive packages from paying the extra VAT – a move that has upset hospitality operators on the Greek islands.
“All-inclusive tourism has already undermined the local café and restaurant trade because it discourages visitors from spending money in the nearby village. This measure is another blow,” said Spyros Kandoulis, a café-owner on the island of Corfu. Evangelos Venizelos, the finance minister, said this week he planned to reverse the increase when an overhaul of the country’s tax administration, backed by the EU and IMF, was completed next year.
Stavros Argyropoulos, another Athens café owner, was sceptical that a VAT increase could be withdrawn or that a boycott on payment would go unpunished. He said he was hoping to reduce overheads to avoid raising prices.
“Our sector will go on being squeezed because it’s a cash cow – Greeks won’t stop drinking coffee and tourists will always want a local meal,” he said. “But coffee is already expensive by European standards and I can’t charge €10 for a Greek salad.”
By Kerin Hope taken from http://www.ft.com/cms/s/0/5a6e2be6-d4aa-11e0-a7ac-00144feab49a.html#axzz1Wno7JgIq
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