Jan. 16 (Bloomberg) — Greece will tax merchant ships managed by companies based in the country and sailing under foreign flags for the first time ever as the nation’s debt crisis spurs the government to raise revenue.
Amendments to a bill passed by lawmakers at the weekend imposed a so-called tonnage tax on the vessels, the Ministry of Finance in Athens said today by e-mail. The government aims to raise 80 million euros ($106 million) this year and 60 million euros in 2014 from the levy, the state-run Athens News Agency reported Jan. 9.
Greek shipowners control the largest portion of the world merchant fleet. The state is targeting an estimated 762 owners, who pay no tax on international earnings brought into the country under rules incorporated in the constitution since 1967. Lobbying by owners barred the imposition of any further taxes, Theodore Veniamis, president of the Union of Greek Shipowners, said by e-mail Jan. 14.
“Shipowners and the management companies have been excluded, as I had to convince the government to do so,” he said.
The e-mail didn’t show when the tax would take effect. The measure “imposes the levy for the first time,” the ministry said. The tax applies only to tonnage of foreign-flagged vessels, rather than their earnings, Veniamis said. A tonnage tax is charged by a country where a ship is registered and flagged and is based on the vessel’s size and capacity.
Ships controlled by Greek companies and flagged elsewhere came to 3,848 totaling 153.1 million gross tons as of March 2011, according to figures on the Hellenic Chamber of Shipping website. That compared with 2,014 vessels totaling 43.4 million tons sailing under Greece’s flag as of the end of the year. The data were the latest available.
Greek shipowners remitted more than $175 billion in untaxed earnings in 10 years until 2011, according to Bank of Greece figures cited in the union’s annual report.
Companies from cargo handlers to travel agents that benefit from Greece’s position as a leading vessel-owning nation might be vulnerable to sudden changes in taxes on the shipping industry, the Foundation for Economic & Industrial Research, a private non-profit researcher, said in a study last week. Navios Maritime Holdings Inc., a Piraeus, Greece-based vessel owner, contributed to the study, it showed.
“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,” the foundation said.
Greeks controlled 16.2 percent of the world merchant fleet by early 2011, giving them the largest share of capacity, according to the latest figures from the Geneva-based United Nations Conference on Trade and Development.
Contributions from providing marine-transport services indirectly and directly accounted for 6.1 percent of Greek gross domestic product in 2009, generating 2.7 billion euros to support 192,000 jobs, the foundation said. The industry’s contribution may have since “increased substantially” given the country’s economic contraction, it said.
Greece’s economy may have shrunk as much as 6.5 percent in 2012, the fifth year of recession, according to forecasts in the 2013 budget. The country had a 15.9 billion-euro budget deficit last year, excluding spending by state-controlled enterprises.
– Michelle Wiese Bockmann and Tom Stoukas, Copyright 2013 Bloomberg.
Image (c) Shutterstock/Albert Fedchenko