The Greek government plans radical changes in the VAT system with the introduction of a single VAT rate of 15% for transactions using credit or debit cards and 18% for cash transactions, along with maintaining a low VAT rate of 6.5% for drugs and other first priority items.
The government proposal, presented by Finance Minister Yanis Varoufakis during a speech at the general assembly of the Hellenic Federation of Enterprises (SEV) on Monday, envisages drastic changes throughout the sales tax system, including plans to abolish tax-exemptions.
For example, the government’s proposal includes a return of a lowered VAT to enterprises based in Aegean islands, which means a change in the prevailing lower VAT status in these regions.
In any case, the introduction of a single VAT rate – replacing the existing 23% and 13% rates – is considered to be one of the issues agreed between Greek authorities and the country’s creditors during the ongoing negotiations.
The government is also examining other interventions in the tax system, such as abolishing tax-exemptions, currently costing around 1 billion euros to the state budget, a very high figure compared to annual revenues of 14.411 billion euros from VAT.
A proposal for the introduction of a lower VAT on transactions using credit/debit cards is part of government plans to expand the use of plastic money as much as possible. The issue was discussed during a recent meeting between Greek government Vice President Yiannis Dragasakis and the heads of the country’s four systemic banks.