Greece to raise hotel tax to support climate disaster funds

Those who rent three or more properties by short-term lease platforms will also have to pay VAT and all levies paid by hotels under new rules

A Greek flag flutters in the wind during a wildfire in Chasia in the outskirts of Athens during September's wildfires. AFP

Greece plans to double its budget backstop for natural disasters linked to climate change by increasing a levy on accommodation, mostly luxury hotel stays, Prime Minister Kyriakos Mitsotakis said.

“Special reserves will increase from €300 million ($320 million) to €600 million,” as of 2024, Mr Mitsotakis said in an annual speech on economic priorities in Thessaloniki on Saturday, following extreme weather that hit Greece with its biggest forest fires and floods in history this year.

The government will fund the increase by raising a hospitality levy by between €1 and €6 per night, he said.

Mr Mitsotakis said that Greece will meet its fiscal targets regardless of the disasters’ economic cost.

Kyriakos Mitsotakis, Greece's prime minister, has pledged to meet the existing fiscal targets despite the natural disasters' economic cost. Bloomberg

Moody’s announced a two-notch upgrade to Greece’s credit rating on Friday, bringing the country to within a step of investment grade.

DBRS Morningstar, Scope Ratings and Rating and Investment Information have already given Greece investment grade since Mr Mitsotakis won re-election in June, citing the country’s economic performance.

Tourism is driving growth, with a 26 per cent year-on-year increase in visitors in the first half of 2023 and a 23.9 per cent rise in revenue.

But Greece’s worst flooding yet killed 17 people in September, drowned tens of thousands of animals and destroyed homes, roads, bridges, businesses and farmland.

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Floodwaters and mud cover the land after the country's record rainstorm, in the village of Nea Lefki, in Thessaly region, central Greece. AP

The government said railway repairs alone will cost more than €150 million.

Storm Daniel flooded about 140,000 hectares, including in the hard-hit Thessaly region in eastern central Greece, a major source of dairy, cotton and produce. The region that accounts for about 5 per cent of Greece’s gross domestic product.

Investors and rating firms want to see the government stick to its reform agenda and fiscal discipline that took hold before the coronavirus pandemic.

Mr Mitsotakis has pledged to meet the fiscal targets despite the natural disaster economic cost and also presented his plan for the reforms in justice system and health sector.

“I will never put in danger fiscal stability,” he said on Saturday.

Mr Mitsotakis also announced:

• Ten measures to fight tax evasion, including that any purchase or sale of homes will have to be done through banks, not cash
• Those who rent three or more properties on short-term lease platforms will have to pay value-added tax and all taxes paid by hotels
• The end of special taxation on Greek bonds in a bid to make them an alternative for depositors
• A 50 per cent cut in the financial transaction tax

Updated: September 17, 2023, 6:21 AM