With the electoral success of the Syriza party in Greece fresh in the memory, it has renewed tensions between Germany and themselves. Syriza has promised more stimuli and a hardening of opposition to austerity cuts that Germany has imposed on them as part of the EU bailout. As both sides appear to have given up some ground in their recent diplomatic exchanges it has brought me to the question of taxation and the shipping community in Greece.
Should Germany be demanding action from Greece to address the lack of tax their ship-owners pay? It would certainly boost the Greek government’s coffers.
95% of all international traded goods in the world are transported by ships. Shipping is a global derived demand as over the centuries international trade has grown between countries. Grains, coal, iron ore, crude oil, refined products, consumer goods all need to be carried by ships.
And who are the world’s biggest ship-owners? Greece.
I bet that surprises a few of you.
Greece has been the world leader in shipping for centuries and the industry has become a proud and well preserved one. They have read the volatile markets better than anyone and boast the biggest names such as Angelicoussis, Frangou and Restis. In the global boom 2005-08 whilst most nations were chaotically ordering expensive new vessels, the Greeks were quietly selling off large numbers of theirs at market levels never seen before.
The result? A bunch of Greek shipowners sitting pretty on huge piles of cash whilst other ship-owners struggle with incredible capital costs on their new ships as the markets turned horribly against them.
What does this all have to do with Germany? Allow me to introduce you to LAW 89/67. This is a law that Greek ship owning families have been taking advantage of since 1967. The law allows a Greek shipowner to register their vessel’s ownership offshore (such as Panama, Liberia etc) whilst ‘managing’ their fleet under a Greek company. This allows for the Greek shipowner to avoid paying Greek corporation tax on the incomes generated on the offshore companies that they own that are the direct owners of their vessels. It also means that their management companies are then not subject to custom duties, import taxes, stamp duties and corporation tax. That’s a lot of taxable income the Greek government are missing out on.
With the election of Syriza, the ship-owning community has feared that the tax positions that they enjoy are under serious threat. Various owners have threatened to relocate their businesses if they are attacked by the government. This has happened before when a significant number of Greeks relocated to London to avoid the authorities in the 60s and 70s.
Ted Petropoulos of Petrofin Research boldly stated ‘shipping is an offshore industry and any act against it is like shooting yourself in the foot’. Ship-owners will argue ‘how can you tax an asset that is offshore’? It is an age old argument that has some strong merits to it.
In June 2014, leader of Syriza Alexis Tsipras indicated that he would eliminate the tax status the ship-owners enjoy. So far, no real move has been made. The ship-owning community in Greece is incredibly wealthy, powerful and well connected. Any move against them would be difficult to pass and implement.
With the Greek economy still in dire straits, Germany will want to see the new administration at least be seen to be doing something to address the situation. Greece’s shipping industry has been well looked after for years by successive governments but with the state crumbling and pressure from Germany to maintain their loan agreements is it time for this industry to be tackled?
By Tristan Allen, Junior Writer for Daily Political View.