As many as 800 family-run companies that control almost a fifth of the global shipping fleet has long been a source of national pride for the Greeks. But, as Greece is debt-ridden, the prospect of higher shipping taxes forces many to explore options to leave their home country.
Forced by the international creditors the newly re-elected Syriza-led government has reluctantly agreed to raise taxes on the long-protected sector. Until 2017, Greek owners voluntarily doubled the tonnage tax—a fixed annual rate based on the size of each vessel. But, they are unwilling to give up their tax-free status on ship profits and money generated from ship sales. Greece’s creditors insist on applying taxes gradually to all shipping operations and for a permanent increase in the tonnage tax.
The finance ministry is trying hard to find alternative sources of income to avoid more taxes. Final decisions on the matter are expected by the end of October. Income-based shipping taxes can raise much more revenue than tonnage taxes. An owner of a midsize vessel in Greece pays a flat tonnage tax of $50,000 a year at the temporary double rate. A comparable U.S. owner might pay about $3.7 million in annual taxes depending on daily freight rates and a Japanese owner could pay $7 million. Tonnage rate is fixed regardless of profitability. U.S. and Japanese owners get tax refunds if their vessels run in a loss.
Cyprus, London, Singapore and Vancouver, Canada, are the likely places for a mass exodus of the country’s ship-owners, where they will enjoy a low-tax. Mr. Gratsos said that shipping remains a bright spot in the reeling Greek economy, generating €13 billion to €19 billion, or $14.6 billion to $21.4 billion, in annual revenue and employing about 250,000 people. As shipping makes up 7% of Greek economic output, it should enjoy a friendly business environment and a steady taxation system to prevent ship-owners moving out.
Cyprus lifted capital controls to entice Greek ship-owners to set up shop. The island’s vibrant shipping sector, with a registry of more than 1,000 vessels, emerged largely unscathed. The friendly environment in Cyprus for shipping is a great lesson, proving what the cooperation between private and governmental parties can bring. Thomas Kazakos, director-general of the Cyprus shipping chamber, confirmed that inquiries from Greek ship-owners about setting up offices in Cyprus came in July, apart from Greek ownership of some 40% of ships under the Cypriot flag.
A Cypriot official said the ship-owners asked about opening bank accounts to buying property and finding schools for their children. The ship-owners are also thinking of moving to London. The most expensive international schools in London said there was a threefold increase in inquiries from prominent Greek families to move out to the UK. Even far away cities like Vancouver have started to attract the Greeks. A lavish reception was hosted earlier this month by the Vancouver International Maritime Center at the Canadian embassy in Athens. There the owners were told that they could manage their international shipping businesses from representative offices in Canada without tax.
Source: The Wall Street Journal