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The obligation to pay taxes triggers strong reactions by Greek ship owners

23 December 2013 / 17:12:33  GRReporter
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A risk of destroying the cluster created by 1,200 shipping companies over the past 30 years in Greece is being reported by Greek ship owners in connection with the regulation of compulsory taxation of shipping companies over the next three years, which the parliament voted on Saturday.

The introduction of a tax on shipping, the first such case after 1975, beyond the limits specified in the Constitution, will open Pandora's Box and lead to rapid negative changes in this important industrial sector, as it will undermine the stability it has achieved over the past 40 years.

Meeting the Prime Minister

During all these years the representatives of the union of Greek ship owners used to say that the only thing they wanted from the state was for it to maintain the stability of the tax and business conditions for the operating of the branch. Now this stability has been shaken by the initiative of the Ministry of Finance. It was no coincidence that the chairman of the union, Theodoros Veniamis, had requested an immediate meeting with Prime Minister Antonis Samaras to reclarify the position of the state in terms of shipping.

The branch was surprised by Article 14 of the Law on property taxation which makes binding the agreement of the voluntary contribution of the industry to the state treasury signed by the ship owners and the government in July.

The agreement provides for the voluntary payment, by the shipping companies, of an additional sum equal to the amount of the tax due for each vessel, which means a double tax for each ship over the next three years.

The regulation voted in parliament actually makes this voluntary agreement binding by providing for the payment of a double tax over the next three years, thus doubling the amount stated in the original contract.

Start of protests

The reactions of the union of Greek ship owners against the regulation in question are not related to the fact that the sum that the shipping companies will have to pay over the next three years has been increased despite the agreement with the government, although the state is inconsistent in this case too.

The key issue for the industry is actually the fact that this initiative cancels the shipping tax regime, which is protected by the Constitution.

Moreover, the regulation voted by the parliament uses the word "payment" instead of "tax" to avoid the obstacles placed by the Constitution.

Early last week, in a letter to Minister of Finance Yiannis Stournaras, Theodoros Veniamis had raised the issue of the constitutionality of the regulation.

Probable withdrawal of foreign companies

Breaching the agreement on the part of the government and the possible additional burden on the shipping companies may lead to the immediate withdrawal from Piraeus of some foreign companies that have established themselves in Greece, leaving open the question of the actions that other Greek companies will take.

The voluntary contribution

According to the Ministry of the Merchant Marine and the Aegean Sea, the number of the shipping companies that had initially taken part in the payment of the voluntary contribution was 441 with a total of 2,769 ships.

It should be noted that the number of ships declared by the shipping companies had included nearly 90% of the total number of ships sailing under Greek flag and about 65% of those sailing under foreign flags. Subsequently, however, other companies had joined the initiative as a result of which 90% of the companies paid the voluntary contribution. Under the new regulation, the government has estimated that it will collect 500 million euro from the shipping industry over the next three years.

The "battle" in Brussels

These developments are taking place at a time when the Greek shipping industry along with the Greek state is leading yet another "battle" in Brussels on the tax regime in the industry. It should be noted that over the past year Brussels has closely monitored the tax regime applied on shipping by a number of European Union countries, including Greece.

As is clear from the contacts established by the union of Greek ship owners with circles of the European Union over the past week, the issue will probably be settled in favour of the Greek shipping industry, as Brussels does not deny the existing fiscal framework for tonnage fees. It is expected that the final decisions will be announced in the coming days but it is not yet clear whether certain tax provisions will remain in force for the industry.

The contribution of shipping to the economy

The contribution of Greece’s shipping industry to its gross domestic product (GDP) amounts to 13.4 billion euro, which is almost 7% of its total value, as shown by a study conducted by the international consulting firm Boston Consulting Group.

The analysis also shows that the shipping industry of Greece is the most competitive one in global terms, as the average operating costs of a Greek ship are 23% lower than the average expenses in the world.

In addition, the direct contribution of the Greek shipping industry is almost 7.6 billion euro or 3.5% of GDP, 6.5 billion euro being the product of ocean shipping. The indirect contribution of the shipping industry and the money that goes to other professional service-providing groups amounts to 2.3 billion euro.

Tags: ShippingTaxesUnion of Greek ship ownersProtests
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