While austerity still reigns supreme over Greek society, amid resurgent refugee arrivals, still near-record high youth unemployment, record-high suicide rates, and a constant brain-drain exodus of young talent, this weekend saw a brief silver lining as the government decided to scrap the controversial special consumption tax on wine.
The measure, which not only did not meet revenue targets, but actually boosted illegal trade in wine and grapes, will be halted by the end of the year.
As KeepTalkingGreece reports, inaugurating the Wine Days of Nemea 2017 in one of wine producing regions of Greece, Minister for Rural Development, Vaggelis Apostolou said that the ministry is working on the legislation to scrap the special consumption tax on wine and it is expected to be ready before the end of the year.“It is a commitment by prime minister Alexis Tsipras that the tax will not exist in the new year,” Apostolou stressed.
Finance Ministry sources told daily Efimerida Ton Syntakton that the special consumption tax on wine caused more damage to the sector of wine producers than it brought revenues to the state.
In November 2015 and in terms of additional modifications to the third bailout agreement, creditors and the Greek government had agreed to impose an special consumption tax on wine, as the country’s lenders had decided they needed to collect an extra 300 million euros in indirect taxes per year. As this amount could not come from the grapes juice alone, they also imposed an extra tax on gambling. Grapes would bring €100 million, the gambling €200 million, creditors had calculated. Later they had modified their calculations down to 55 million euros per year.
The original proposal was that the extra tax would be 0.20-0.30 euro liter bottle, regardless of whether Greek or foreign wine.
Ultimately, the tax was 0.20 euro, some extra fees were added, a drop of tax here and a drop of fee there, the retail price reached 1 or 2 euros more per bottle for the consumer – although the average bottle has 700ml and not even one liter. In the magic world of Greek commerce, prices for average table wine of not worth mentioning quality ended up to be sold at €6.90 per bottle in the supermarket – from €4.90 before the tax.
The special consumption tax not only did not increase state revenues but literally backfired. It increased illegal trade in wine and grapes for wine making.
In 2016, the state collected less than 24 million euros from the extra consumption tax on wine. Instead of a permanent win from wine, the state in fact suffered a loss, if one takes into consideration the amount of money that did not land in state cash registers due to the illegal trade.
We are yet to hear what Germany thinks of this plan.