Greece's VAT experiment

A deal struck between the Greek Finance Ministry and business representatives from the catering industry resulted in the value-added tax decreasing to 13 percent for hotels and restaurants as of August 1, down from a previous rate of 23 percent.

The government confirmed Thursday that the move was aimed at boosting the country's tourism trade, which accounts for more than 15 percent of the Southern European nation's gross domestic product (GDP).

Fresh statistics revealed the tourist season had already been going smoothly, with a new visitor record expected for the year. But Prime Minister Antonis Samaras said he wanted to provide additional incentives to the sector.

"For the first time in a long period, we're talking about a positive development," he said in a televised address.

No one-way street

But the deal comes with strings attached for hotels and restaurants. The government insisted the lower VAT rate must at least partly be passed on to customers in terms of lower bills for services. Athens said the reduced VAT rate would be reversed should caterers not comply with the deal.

Critics said they doubted whether the government would allocate enough resources to check if hotel and restaurant owners played along.

The government said the move was also an attempt to rein in tax evasion in the sector. According to the newspaper "Ta Nea," fraudulent businesses could now be punished by a 48-hour closure, with a notice on a board attached to the hotel or restaurant and saying "Closed because of tax evasion."

hg/ tj (AFP, dpa,)