Thursday, 24 January 2013

Greek debt crisis sees first time ever tax on shipping companies

For the first time ever, Greece will tax domestic companies who control merchant ships sailing under foreign flags, a move that many say was inevitable. The so called tonnage tax will raise 80 million Euros ($106 million) this year and 60 million euros in 2014, the Athens News Agency says. The country has been trying to target 762 ship owners who have been exempt from tax since 1967 on international earnings brought into Greece.

As of March 2011, 3848 ships totalling 153 million GRT were controlled by Greek companies and flagged abroad. The country’s ship owners remitted tax free into the country some $175 billion in 10 years until 2011. Greek ship owners control the largest chunk of global tonnage- around 16 per cent- and have been lobbying hard to stave off taxes ever since the Greek crisis hit.  Lobbying by owners has prevented even higher taxes, Theodore Veniamis- the president of the Union of Greek Shipowners- told Bloomberg. “Ship owners and the management companies have been excluded, as I had to convince the government to do so,” he said. The tax applies only to tonnage of foreign-flagged vessels, and not on earnings.

Unsurprisingly, there is continued resistance to the new tax from Greek’s powerful maritime industry, and additional fears- that taxation on shipping would affect jobs and encourage companies to move elsewhere- may not be completely unfounded. Says the nation’s Foundation for Economic & Industrial Research,  an NGO: “An abrupt, and without due care, change of the taxation regime in the shipping sector may lead to reduction of the economic activity in the sector and across the economy, significant job losses and even lower net tax revenues.”

In 2009, the maritime sector accounted for more than 6 per cent of Greek GDP- and almost two hundred thousand jobs.

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