Greek Shipping Firms Unhappy With Tax Regime
Tax regime instability has been cited by Greek shipping companies as a reason why they would consider switching to an alternative jurisdiction, according to a report by EY.
The report, “Repositioning Greece as a Global Maritime Capital” found the lack of a stable regulatory regime and tax issues were “by far” the main disadvantages of Greece as a ship-management location. As a result, more than half of those surveyed would consider relocating their ship management functions with London, Dubai, and Singapore gave as the most favored destinations.
The results of the survey show that 69% of respondents saw Greece’s regulatory environment as a disadvantage, with tax matters cited as a negative factor by 62% of respondents.
Most of the respondents (84%) also said that the tax framework was their main concern when considering the jurisdiction of relocation.
Specifically, concerns were raised by survey respondents about plans under consideration by the EU Commission to increase the Greek tonnage tax, apply taxation on dividends and tax transfer or inheritance of shares.
The report concluded that “maintaining a stable tax framework and establishing a favorable tax environment for the relocation of expatriates is crucial for strengthening the position of Greece compared to emerging shipping centers.”
According to the union, there is no effective distortion of competition in the maritime field in the EU due to the current taxation scheme.
“Any fundamental changes to the institutional and fiscal framework in which the Greek shipping community is presently operating, would have unforeseeable consequences which would be detrimental not only for Greece but also for the rest of the EU as they would seriously undermine one of its most important strategic sectors which remain prominent internationally in the face of fierce competition” UGS said.
The union claims that the Greek institutional shipping regime predates the State Aid Guidelines (SAG) and that the Greek maritime framework constitutes pre-accession law, which was recognized during the accession of Greece to the EEC in 1981 and has not been questioned until now.
What is more, DG COMP’s present investigation and decision are not the result of a formal complaint, the union added.
The union further stressed that the 1997 Maritime SAG was not introduced in the form of an EU Directive or Regulation with a view to imposing uniformity of application across the Member States, but a flexible “soft law” to provide a framework, not a level playing field since even the levels of tonnage tax paid for vessels of the same size differ across the Member States.
The decision of the European Commission regarding the Greek shipping taxation system and its statement that it will be used as a precedent for the assessment of other EU shipping regimes will seriously disrupt the shipping sector in the EU after twenty years of successful growth without formal complaints and negligible intra-EU reflagging or re-establishment of shipping companies.
“The European Commission must focus on the strategic, commercial and international dimension of the EU shipping industry in its diversity and its potential mobility, rather than concentrate on the nominal or juridical aspects of compliance with the letter of the SAG within the EU. Otherwise, the Commission will undermine the confidence of shipping entrepreneurs and may encourage relocation of companies outside of Europe,” the union added.
The shipowners pointed out that the Greek shipping industry was never part of the debt problems of the Greek state, adding that the decision could undermine one of the Greek economy’s primary pillars at a time of exceptionally high unemployment and urgently needed growth prospects.
According to the Boston Consulting Group (BCG) and the Foundation for Economic and Industrial Research (IOBE) state, Greek shipping contributes over 7% of GDP, provides employment to 200,000 people and covers over 30% of the trade deficit.
Greece was given 2 months to inform the Commission whether it agrees to the measures proposed and to review which vessels are eligible under its system.
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