A near-doubling in taxes on restaurant sales has backfired, driving out customers, closing 4,000 establishments in a year, and producing lower revenues, leading the Greek government to consider a repeal of the measure.
Tourism Minister Olga Kefaloyianni has suggested that the government will attempt to reduce from 23 to 13 percent the Value Added Tax (VAT) on restaurant, cafe and bar bills.
The tax was raised to 23 percent by the previous PASOK government as part of efforts to increase tax revenues but a drop in demand has made it a spectacular failure as Greeks also hit with big pay cuts, other tax increases and slashed pensions, have stayed home to cook instead.
It is estimated that turnover in the food and catering sector is down about 40 percent, which led to 30,000 jobs being lost.
In the summer election campaigns, New Democracy leader Antonis Samaras had pledged to reduce the VAT rate charged by restaurants, but has not yet done so far, failing to fulfill another of one of his many promises. The VAT hike drove away so many customers that many establishments took to drastically reduced prices to get them to return, to no avail for some restaurant and café owners who had to shut their doors.
Coffee that used to cost as much as 5 euros ($6.60) a cup, which had been the second-most expensive in Europe – behind only Paris – can now be had in some places for as little as 1 euro, ($1.32) but has done little to help some establishments. Some restaurants have offered to pick up the difference in the VAT increase in another attempt to keep customers coming.