11/11/19

EUROPE: Greece Feeds Economic Recovery with Tax Law to Lure Investors.

As published on theguardian.com, Thursday November 7, 2019.

Not so long ago, the idea of Greece announcing tax relief measures to entice the global rich would have been regarded as a joke. With the EU’s weakest economy and a leftist government that has been in power for just three months, the world’s wealthy were keen to keep their distance.

But in a marked departure of policy, the centre-right administration led by Kyriakos Mitsotakis has offered an array of incentives to attract the rich.

On Thursday, the government unveiled legislation that included the introduction of a flat tax of €100,000 on global earnings. The quid pro quo? Investors would have to move their tax residence to the country.

The measure is the latest move by the pro -business government to boost growth. After nearly a decade of austerity-driven recession – the price of three successive bailouts on the frontline of the euro debt crisis – Greece, said Mitsotakis, a former banker, was in need of investment if regeneration was to take hold.

During a visit to Shanghai last week, Mitsotakis told the Chinese president, Xi Jinping: “Today in Greece there is a government that is determined to facilitate foreign investors, attract foreign capital and create wealth and prosperity for all Greeks in a way that is sustainable and protects the environment.”

Under the programme, which also aims to lure China’s super rich, investors will be required to reside in Greece for at least 183 days a year and make a €500,00 euro investment within three years.

The law forms the centrepiece of legislation that also foresees businesses and households paying lower taxes. Under the draft bill the corporate tax rate will be cut from 28 % to 24%.

Mitsotakis’ pledge to reduce taxation played a big role in his New Democracy party’s electoral victory in July, in a nation previously among the most heavily taxed in Europe.

The announcement of the measures attracted criticism from the left. The leftwing Syntaktwn newspaper, regarded as espousing the views of the Syriza party of the former prime minister Alexis Tsipras, derided the policies as tax breaks “for golden boys”. New Democracy has been widely accused of being hellbent on luring foreign capital at the expense of workers’ rights.

The relief measures in the programme, now put to parliament for debate, will apply until 2034. “The tax incentive will run for a duration of up to 15 years and will include the benefit of no inheritance tax for assets outside Greece,” a senior official was quoted as telling Reuters. “The investment can be in real estate, stocks or bonds. If the investment reaches €1.5m then the flat tax is cut by half.”

Investments which are double that size – €3m or more – would reduce the flat tax to €25,000, the official said, adding that once applied the measures would be irreversible to protect investors from policy changes by future governments.

The government hopes the incentives will help lure Greek shipping magnates, many of whom have preferred to stay abroad because of the country’s high taxes, back to Greece.

The measures were announced as the European commission said that the Greek economy would grow by 1.8% this year, partly on the back of stronger exports.

Releasing its autumn forecasts on Thursday Brussels said it also foresaw Greece’s once bailout-dependent economy expanding by 2% in 2021 – the year the country will mark the bicentenary of the revolt when Greeks broke away from Ottoman rule and formed an independent nation state.

Both of the projections are lower than that given by the Greek government, which is targeting growth rates of 2.8% in 2020 – seen as overly optimistic by the European commission and other institutions. However, on a more hopeful note, the commission said it also believed unemployment in Greece, which at the height of the crisis stood at almost 28%, was on course to drop from its current rate of 17.3% to 15.4% in 2020.