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Greece's international lenders open way for higher taxes on shipping

Greece's international lenders open way for higher taxes on shipping
Greece’s international lenders appear to have opened the way for the Greek socialist government to tamper with the country's “constitutionally protected” shipping tonnage tax legislation.

In the run-up to the January national elections which brought the Syriza-led socialist government to power, there had been talk of overhauling the shipping tax legislation, but to now the Alexis Tsipras-led government has refrained from such a move, which could lead to shipping companies moving out of Greece.

Indeed, the country's Finance ministry has pointing to the fact that the shipping tax status is protected by the country's constitution. Greece’s constitution can only change after a complex and time-consuming process.

However, on 25 June, it emerged two of the Greek economy’s most competitive sectors, shipping and tourism, are set to suffer a big blow from proposals made by the country’s creditors that provide for an increase in taxation.

Creditors are asking for an increase in the tax on ships’ capacity that Greece-based ship management companies pay and the gradual abolition of the provisions of the legislative framework according to which these firms operate.

The move will inflict a direct blow on a sector which contributes 7% to the country’s GDP and directly provides 192,000 jobs. The annual contribution to Greek coffers from shipping tops Euro 13bn.

It now seems the country's creditors have given the green-light to the government, to at least impose some form of new tax.

The Union of Greek Shipowners recently dismissed any notions it is under-taxed, arguing the Greek government’s tax revenues from shipping have increased more than eight-fold since 2013. The industry voluntarily agreed to a doubling of its tonnage tax payments over the 2014-to-2017 period, resulting in total receipts of Euro 420m ($469m).

“Moreover, since 2013, vessels flying foreign flags operated/managed by offices established in Greece became subject to Greek tonnage tax,” the UGS said in its annual report released mid of this month.