Living with Greece's new tax increase

Two weeks ago, the Greek government began implementing one of the new reform measures negotiated in Brussels: a VAT increase. And the Greek tourism industry has been affected more than any other.

In the middle of the summer tourist season, restaurant and hotel owners are struggling to find a way to apply the new tax. Pricing and deals with tour operators and airlines were negotiated months in advance, and travelers who have already paid for their vacation will be reluctant to pay additional fees.

"This is very bad for the tourism industry, but also for the whole country in general," said Giorgos Livanis, a restaurant owner on the Olympian Riviera, near Thessaloniki in northern Greece. "In the long run, we won't be able to compete with other Mediterranean countries like Turkey, Italy and Spain."

Livanis points out that the VAT everywhere else is much lower than in Greece. "The others will be pleased when everything becomes more expensive here," he told DW. He has decided not to increase the VAT immediately, but instead maintain the old prices. "All prices were calculated at 13 percent, but now actually 23 percent has to be applied," he said.

Livanis isn't the only one with this problem. Many Greek businesses basically agree with the deals that the Greek government negotiated in Brussels, even if every cent of higher taxes hurts the Greek economy. But the tourism industry is rather surprised by the date that was decided for such a large VAT increase, and Livanis is convinced that it can't be properly introduced in the summer.

"This plan will not work out," he insisted. Even the ice cream vendor near his restaurant has been losing customers, even though ice cream prices have only gone up slightly.

Making provisions

"Right now I'm thinking of people in the city who have to buy everything. It's somewhat easier for us here in the country," explained Maria Vassiliadou, a 50-year-old mother of two daughters.

Vassiliadou is glad to be living in the country. She believes that in the city, her family wouldn't be able to pay the repeated price increases on food in the long term.

"In the country, many of us have made provisions for hard times for a long time now. We have olives and olive oil, a small boat to go fishing and a vegetable garden where almost anything grows," she said, while admiring her tomato plants.

Anna Karenou, the owner of a guesthouse on the northern Greek coast, has also been doing the math. She doesn't want the higher VAT rates to scare off her visitors, even though the increase won't be mandatory until October.

Karenou knows she can't ask for more than 70 euros ($77) a night for a bed and breakfast in her 14-room guesthouse. Greek regulars have already stopped coming, forcing her to think of alternatives.

"If I keep the old prices, then I have to pay the difference for the increase. If I raise the room prices, then visitors will think twice about booking," she told DW.

The enterprising businesswoman broods over the situation. In the tourism sector, business tax has increased from 6 to 13 percent. "I just don't know how to deal with it; bookings have already been confirmed. I can't change much this year," she said.

And in the coming year? Will guests stop coming? Karenou shakes her head in uncertainty. "Maybe I should split the extra costs with the guests. Then I won't raise prices by 13 percent because of the tax, but only by 10 percent."

A matter of mentality

Things are clearer to Stavros Drivas, a cafe owner on the Halkidiki peninsula. "They can do what they want; we cannot just function with numbers. That's why these changes are upsetting us."

Drivas has been working in the tourist sector for more than 30 years, and has a great deal of experience. He's decided to maintain the current prices for non-alcoholic beverages: 2 euros for a cup of coffee, 2.50 for juices and soft drinks. He only intends to charge 23 percent VAT on wine and spirits, like whiskey and vodka.

There is one thing Drivas wants to avoid: making his customers feel uncomfortable. He would rather earn less. "Here, we are interested in human interaction and emotions," he said.

A German friend, with whom he used to spend time with every day, once reproached Drivas for inadvertently charging his son 5 cents too little for a souvenir.

"He waved his index finger and said that it was my mistake; it was wrong that way." But, said Drivas after a brief pause, "We deal with small amounts of money differently here. I would never have asked one of his boys for the 5 cents."

Sensitivity in interactions with others is more important to Drivas than money. "We have been thoroughly shaped by this mentality. That's what confuses Europe and why we are often misunderstood."