Greece in second 2% VAT increase to 23%

As part of state budget bailout discussions with the ECB and the IMF, Greece has agreed to increase its VAT rate for a second time. The new standard Greek VAT rate will be 23%. Implementation date is expected to be 1st July 2010.

This follows the 2% increase from 19% to 21% on the 15th March (see Greece VAT increase to 21%) which was part of a package of fiscal measures designed to steady Greek debt costs and reassure capital markets.

Given the position of their finances and the urgent need to demonstrate to the financial markets that Greece was serious about financial discipline, this further VAT rise was looking inevitable. VAT is always a fast and efficient route to generate additional state tax revenues. Whilst unpalatable politically, there seemed few alternatives. We can expect to see other countries follow suit - Spain and Finland have already announced forthcoming VAT rises. Portugal, Bulgaria and the UK are probable contenders for near future hikes.