XRTC Report: VAT Hike on Greek Coastal Shipping to Have Opposite Effect
The increase in value-added tax (VAT) from the current 13 percent to 23 percent and the ongoing capital controls implemented in Greece, in order to meet the demands of the country’s lenders is bound to take a toll on the country’s coastal shipping sector, according to an annual report by Piraeus-based XRTC Business Consultants.
According to the 14th XRTC report, a tax increase translates into higher travel costs, inevitably leading to a drop in demand and thus directly affecting companies’ revenue and ability to operate, with a potential “grexit” still looming.
“The consequences of a possible increase in VAT rates will have exactly the opposite effect: the significant decrease in tax revenues. Given the continuation of negotiation talks, rates have not been finalized, making almost certain that shipping will suffer multifold due to the immediate increase in VAT on tickets as well as to the hikes in rates applicable to the islands and tourist services,” the reports says.
The XRTC findings reveal that for the first time in five years, the sector reported positive earnings (EBITDA), while passenger handling and cargo transport increased marginally by 1 to 3 percent. At the same time, 2014 saw a rise in the overall number of tourists to the country by 15 percent, compared to 2013, with cruise arrivals up by approximately 13 percent against the previous year.
The government has failed in the previous months to make productive decisions and take constructive measures with regards to the shipping sector, the report says, and is drawing the attention of the relevant authorities to the need for incentives in order to boost the sector and pave the way for innovation through strategic planning and a viable entrepreneurial framework.
“The Greek coastal shipping sector should be an integral part of the Greek tourist product and not just serve as a transport operator of Greek tourists.”
The report adds that the Greek coastal shipping industry contributes approximately 6 percent to the country’s GDP, serving more than 35 million passengers annually.