News from GTP this week tells of Aegean islands about to sink under heavy taxation that appears to be a punishment levied by the EU. According to the news, the mayors of the North and South Aegean islands have appealed to the European Parliament to resend a decision to abolish special tax status. The mayors argue their islands are being treated unequally in terms of taxation compared with the rest of the country’s regions.
For those unfamiliar with the status of Greek islands where taxes on tourism are concerned, Greek island authorities and tourism officials have repeatedly called on the government to re-examine its decision in regards to the abolition of reduced value-added-tax (VAT) rates for 27 Northeast Aegean and Dodecanese islands which took effect on January 1. What was a discounted rate now appears as a level to get more islands to accept refugees, a move which most agree will further damage the livelihoods of Greek islanders? The abolition of reduced VAT rates from the Greek islands is a demand of Greece’s international lenders. The measure, first introduced in 2015 to gradually take effect on the Greek islands, had been suspended once again for the aforementioned islands in 2017. But the question remains; “Can Aegean tourism survive the given the industry suffers even with the reduced VAT?” Logic tells us the answer.
According to the report at GTP, the European Parliament committee has agreed to examine the mayors’ petition, requesting that the European Commission conducts a preliminary investigation into the Aegean Islands’ claims, which have been forwarded to the Committee on Regional Development, the Committee on Economic and Monetary Affairs and the EP Intergroup Seas, Rivers, Islands & Coastal Areas. From a personal standpoint living and reporting from here on Crete, I have friends in ideal touristic spots who are about to lose their businesses already on account of these taxes and other austerity measures. The Greeks are working themselves to death to keep once profitable businesses open, with virtually no help from either the EU or Athens.
Also of note, with the exception of five of these Aegean Islands, all others are required starting January 1 to implement new VAT rates from the current 5 percent, 9 percent and 17 percent to 6 percent, 13 percent, and 24 percent, respectively on basic food items, medication, hotel stays, books and magazines. Lesvos, Chios, Samos, Kos and Leros are the ones who have received ongoing refugee flows, and these will so far retain their discounted tax status. Meanwhile, the Regional Union of North Aegean Municipalities recently agreed to further pursue the case legally with the support of competent EU bodies.
At the same time, a newly applied stayover tax on overnight hotel stays is exacerbating the situation in view of the fact that the Islanders’ main source of income is through tourism. This tax can leverage can only be described as a form of blackmail. In this, the EU appears to be the equivalent of killing the goose that laid the golden egg. These island businesses are barely afloat WITH the tax break in place. A Deutsche Welle report on these islands revealed the brazen fact that accepting refugees destroys tourism. According to that story, Kos and the other refugee harbors lost half their tourism business, only to gain a tax break from the EU.
All this should lead Brussels lawmakers to consider the greater refugee crisis in correlation to economies and other critical EU state situations. Greece, in particular, can ill afford to keep pace with Germany or other states in adopting more needy people. With the IMF and bankers leaning on the country in every sector, it is only a matter of time before the burden is too heavy to bear. I know from personal experiences, that these taxing schemes have stifled growth, and threaten to put thousands more business into receivership despite what Athens economist proclaim.