Greece to propose flat 18% VAT rate

As part of the ongoing bailout negotiations between Greece and its creditors, a proposal is being considered for a single VAT rate of 18%.

Currently, the standard Greek VAT rate is 23%. There are also two reduced VAT rates of 13% and 6.5%. The proposal is to combined these rates together at 18%.  A move to a flat-rate scheme would help simplify administration and help reduce potential VAT fraud.  But it would be unprogressive in the sense that it would hike VAT on many basics, including foodstuffs, which the poor spend a relatively larger amount of their income on.

Any implementation is likely to be in July 2015 or later.

It is estimated that that there would a slight increase in overall VAT take if this scheme was introduced. This would also include the withdrawal of the discounted VAT rate on certain Greek islands.  Greece had been holding out against a VAT rise on the islands. It had also insisted that the Greek reduced tourism VAT rate of 13% remain in place to help sustain this key industry. This rate had been introduced in 2013.

Any change to the Greek regime will have to be approved by the Troika of the ECB, EC and IMF.