The Cabinet has agreed on the state budget strategy, establishing the financial framework for the next four years. At a late night meeting on Thursday, it was decided to rise VAT tax for hotels from 9 to 14 percent, and fuel excise duty for next three, instead of previously said four consecutive years.
During the cabinet meeting, it was decided to implement the social tax rate change earlier to decrease labour-related taxes. The changes will be implemented in the beginning of 2017 in two stages – half in 2017 and one percent in 2018. This approach should decrease the tax burden at a faster pace and decrease the administrative burden of entrepreneurs.
Additionally, alcohol excise duty will rise another 5 percent in addition to the existing 10 percent in February 2016, and tobacco excise by 3 percent in 2016-2018. In 2019 and 2020, both alcohol and tobacco excise duty will go up another 10 percent. This enables the Cabinet to cancel the fuel duty excise rise in 2019.
The excise duty rate on diesel and petrol is still set to rise 14 and 10 percent respectively on 2016, and another 10 percent on 2017 and 2018.
Accommodation establishments will be subjected to a VAT rise from 5 percent to 14 percent, starting 2017. The Cabinet also pledged to look for ways to boost tourism, especially rural tourism.
The base rate of fines for misdemeanor offenses will rise from four euros to 10 euros per day. The rate was last changed 10 years ago.
In addition, the Government decided to allocate 20 million euros next year to construct the eastern border. The construction of the eastern border will begin from the mainland border by establishing a modern technical surveillance system and marking the border with border inspection posts, signs, fences and other essentials.
The objective of the strategy is to keep the structural budget position of the general government in surplus every year. According to a press statement, the basis for the Government’s choices regarding covering sources is the principle of taxing harmful consumption instead of income, favoring primarily taxing activities in which people have a choice (increasing alcohol and tobacco excise duty and the fine level) and reducing tax incentives.
Editor: M. Oll