VAT

PPC to implement VAT reduction retroactively as of May 1

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Power utility PPC will retroactively implement a VAT reduction for electricity bills, from 13 percent to 6 percent, as of May 1 rather than a May 20 starting date set by related legislation, PPC sources have informed.

PPC’s administration is anticipating an improved collection record for its unpaid receivables as a result of the VAT rate reduction on electricity. The unpaid receivables figure at PPC is currently estimated to be 2.5 billion euros.

Electricity consumers across the board are expected to collectively save approximately 270 million euros as a result of the VAT rate reduction.

As the dominant electricity retailer, PPC, serving roughly 7 million customers, constitutes the biggest chunk of this total amount. Its customers stand to save approximately 210 million euros.

On an individual level, PPC customers can expect to each save over 50 euros per year, according to PPC chief executive Panolis Panagiotakis.

The reduced 6 percent VAT rate applies to all surcharges included in electricity bills except for municipal charges.

 

Major-scale consumers to benefit most from energy VAT rate cut

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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.

Independent suppliers protest operator VAT discrepancy

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The country’s independent electricity suppliers are demanding a VAT rate reduction to 13 percent from the current 24 percent rate imposed by DEDDIE/HEDNO, the Hellenic Electricity Distribution Network Operator, arguing the VAT they collect from electricity consumers is relatively lower at 13 percent.

This imbalance, forcing independent electricity suppliers to cover greater VAT rates for their DEDDIE electricity transactions than the VAT imposed on amounts they receive from consumers, is one of a series of unfair market conditions identified by independent suppliers as obstacles restricting the development of competition.

The 11 percent VAT discrepancy is detrimental to the financial performance of independent electricity suppliers, company officials have stressed.

Besides households, power VAT hike would devastate PPC

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The additional overall annual electricity cost for consumers should a VAT hike on electricity bills being demanded by the country’s creditor representatives be imposed would add up to over half a billion euros, it is estimated.

Last year, the total amount of VAT collected through main power utility PPC electricity bill payments reached 715 million euros. If the VAT rate is increased from 13 percent to 23 percent, as the creditor representatives are demanding, this annual amount is expected to exceed 1.2 billion euros, which boils down to meaning that recession-struck households will stretched even further.

Judging by the widespread struggle of households to make ends meet, a VAT hike on electricity bills will surely further increase PPC’s unpaid receivables, already estimated to be at an alarming level of 2.3 billion euros, which would prove devastating for the utility.

PPC is currently seeking to lower its level of unpaid receivables through recently softened payback terms for troubled consumers.

Electricity bill costs will increase by between 8 and 10 percent if a 23 percent VAT rate is imposed. Average households using electricity amounts of 1,400 to 2,000 KWh per every four-month billing period will each be required to pay between 15 and 20 euros more for electricity.

PPC recently reported a loss for 2015 as the corporation increased its bad debt provisions in the low and medium-voltage categories to 781 millions euros in 2015 from 309 million euros in 2014.

Energy minister Panos Skourletis, obviously aware of the negative impact of a VAT hike increase on PPC and Greece’s electricity market, has categorically denied that a VAT hike increase for electricity bills is being negotiated.

Lenders retable VAT hike for power bills, from 13% to 23%

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The country’s creditor representatives have, in negotiations over the past few days, once again proposed increasing the VAT imposed on electricity bills to 23 percent from 13 percent as a measure to help cover the fiscal gap, according to sources.

The idea had also been tabled last June as a way to swiftly boost tax revenues, but had been rejected by the Greek side.

Last time they had proposed a VAT hike on electricity bills, the lenders reasoned that an additional sum of 570 million euros could be quickly raised, considering the main power utility’s revenues. At the time, the state was collecting 730 million euros in tax revenues from a 13 percent VAT charge on electricity bills, which, the lenders calculated, would be increased to 1.3 billion euros if the VAT rate was increased to 23 percent.

However, the proposal had prompted local concerns over the wider detrimental impact on Greece’s electricity market. This concern remains.

The energy ministry is currently looking for ways to lower electricity tariffs in the second half of the year. A VAT hike from 13 percent to 23 percent would certainly undermine this effort.

The ministry is believed to be pushing for a five percent reduction of electricity costs, whereas the suggested VAT hike would ultimately increase bills by nearly nine percent. This could prove devastating for the electricity market, overall, considering PPC’s current level of unpaid overdue electricity bills owed by consumers, estimated at 2.2 billion euros by the utility.

PPC revenues help support the Greek energy market, including its RES sector and localized power generation at non-interconnected islands, funded by a Public Service Compensation surcharge on power bills.

A VAT increase on electricity would also apply inflationary pressure on a chain of products and services and threaten to flatten consumption and trading activity even more. The level of competitiveness of export-oriented companies would also be affected.

For ordinary households, a 10 percent VAT increase to 23 percent would, for example, increase the VAT amount added to an electricity bill using 1,200 KWh of power over a four-month billing period by 17 euros – from 22 euros to 39 euros. This electricity bill’s total sum would subsequently increase from 192 euros to 209 euros.

Energy ministry officials contacted yesterday by energypress denied knowing anything about a VAT hike proposal on electricity.

The finance ministry is ultimately responsible for the effort being made to cover Greece’s fiscal gap.