Loopholes appear in Greek VAT cut

There appears to be a number of loopholes in the lauded value-added tax (VAT) cut in Greece, looking at a government circular out yesterday.

The circular issued by the Greek Finance Ministry confirmed that VAT will be cut to 13 per cent from 23 per cent from tomorrow for a five month trial period in restaurants, bars, tavernas and hotel for food (but not alcoholic drinks) until 31 December 2013.

The International Monetary Fund has praised the move, saying that a VAT tax reduction for restaurants would not affect the Greek government's revenue target for 2013.

However, there seem to be some loopholes, identified by the Kathimerini news site.

For instance, a soft drink delivered to one’s home or workplace will have a 23 percent VAT rate, but if consumed inside a restaurant the VAT will be just 13 percent. If a soft drink is taken from a hotel room minibar, the VAT rate will be 23 percent, but if room service brings it to the room it will have a 13 percent VAT rate.

The Finance Ministry estimates final retail prices will have to fall eight per cent for customers to feel the full benefit.

The Greek Finance Ministry's general secretary for revenues took to Twitter earlier today to clarify that VAT on food services would be 13 per cent regardless of where it was eaten - with the sole exception of soft drinks.

[The rate only differs in soft drinks depending on whether it is consumed in the restaurant or not.]