A rate cut for VAT imposed on electricity and natural gas, down to 6 percent from 13 percent, announced yesterday by Prime Minister Alexis Tsipras, stands to primarily benefit major-scale consumers and will pass as a minor cost reduction for most households, energy supply firm officials have determined.
Households consuming higher energy amounts and industrial firms can expect a noticeable cost reduction, officials commented, while pointing out that businesses will mostly see a cash-flow improvement as their VAT inflow and outflow is offset.
The measure’s impact on main power utility PPC customers paying their electricity bills on time will be minimal as the VAT cut will more or less balance out higher costs prompted by a recent company decision to reduce the utility’s punctuality discount to 10 percent from 15 percent.
Given the Greek electricity market’s annual turnover, totaling an estimated 5.4 billion euros, the VAT reduction promises electricity consumers annual savings of about 270 million euros. As for the natural gas market, the tax cut is expected to offer household consumers annual savings of between 12 and 14 million euros.
It remains to be seen if this VAT rate cut can lead to any improvement of energy bill payment records, especially at PPC, facing a massive unpaid receivables problem. Sector officials are doubtful as the tax revision offers minimal energy cost savings for household consumers.
PPC’s introduction of its 15 percent punctuality discount in July, 2017, a measure that emerged as a far greater incentive than the just-announced VAT rate cut, did not improve the power utility’s collection record.