The doubling of value added tax on hotel accommodation from 6.5% to 13% will hurt Greek tourism, according to a study on behalf of the Association of Greek Tourism Enterprises (SETE).
According to the Ernst & Young audit firm study, the VAT increase will have a domino effect that will affect the whole of the Greek economy on several levels.
In real terms, the overall VAT increase will bring state revenue that will not exceed 200 million euros in five years, or a maximum of 70 million per year. However, overall losses in the Greek economy will be higher, the report said.
During the first year of the new hotel accommodation VAT, the estimated overall losses in the tourist sector will range between 415 and 680 million euros. Long term losses will range between 1 to 1.7 billion euros. This will impact the domestic gross product, with an estimated loss of 1.4% of the GDP, or 3 billion euros.
In terms of job losses, the study showed that in 2015, 18,500 to 30,000 full-time employees in the tourism industry will lose their jobs. In a five-year period, the number of job losses will range between 44,000 and 73,000. This will also mean less contributions to insurance funds.
The 13% VAT will mostly affect the thousands of small and medium tourist businesses that are struggling to survive, competing with big hotels or chains. These businesses will find it hard to compete, stay afloat and retain the jobs they provide. Especially small hotels and motels in areas that are not well-known or businesses that cater to Greek tourists mostly, will suffer the most from the VAT increase.