Saturday, November 28, 2015

Greek Shipowners - More Take Than Give?

Reuter reports on The Greek Shipping Myth. The Greek shipowners are not going to like it.

The organizational structure which the shipowners are using is not unique. On the contrary, probably every larger company with international/multinational operations is using similar structures; at least to an extent. And --- there is nothing illegal about it.

For example: an Austrian supplier of, say, pulp plants owns valuable patents. He will, in all likelihood, house those patents in some offshore company in a tax haven; very often Cyprus. And whenever the Austrian company sells a plant, a royalty is paid to the Cyprus company for using its patents. This is totally transparent to the Austrian tax authorities but those royalties reduce the taxable income in Austria dramatically.

The only effective measure for a government to still get some revenue out of such structures is to negotiate the royalties which leave the local tax jurisdiction or, vice versa, the percentage of total revenues which return to the local tax jurisdiction as management fees. In Reuters' example, Greece gets about 5% of total revenues as management fees. If that were increased to 10%, the absolute amounts would double.

There is, of course, this argument via-à-vis local tax authorities that "if you don't give us what we want, we will move our business elsewhere". Apparently, the Greek shipowners could move their business elsewhere with the stroke of a pen and that would hurt the Greek economy. Perhaps not as much as the shipowners claim but still.

I have never met a Greek shipowner, I only know about them through the media. Still, my guess is that there is no other place on Earth where the Greek shipowners and their families would enjoy their private lives as much as in Greece. They might be able to play big roles in places like London, Paris, Geneva or Zurich but in Greece they have a whole country to play with. They might own exclusive homes in places like London, Paris, Geneva or Zurich but they cannot enjoy there the spectacular scenery and the 'Greek way of life' which Greece offers. Finally, they might enjoy a luxurious life style in places like London, Paris, Geneva or Zurich but the kind of 'Greek enjoyment of life' which they can have in Greece they won't get anywhere else.

So, everyone has an Achilles' heel and an Achilles' heel plays a key role in every negotiation. I would venture to say that the Achilles' heel of the Greek shipowners is that they want to live in Greece, at least part of the time. And if you live in Greece full or part of the time, you are privately subject to Greek tax laws.

To catch corporate taxes in a world of tax havens is a most difficult taks. To catch private taxes is much easier because the tax subjects are in the country and they don't want to emigrate. Thus, it would seem to me that, instead of chasing corporate taxes of Greek shipping companies, the Greek tax authorities should make a much greater attempt at chasing private taxes and to design tax laws accordingly.

1 comment:

  1. Yesterday (28th Nov) I posted this on my facebook page;
    Only if the shipowners hold large part of their liquidity in Greece, instead of in overseas offshore accounts, should they be allowed to retain their tax privileges. This is the sole way to restore a sufficient deposit base in the banking system.
    Such deposits are imperative in order to achieve the potential for credit capacity to be restored."
    Michael Bernegge.

    This is the conclusion of an article the Swiss economist wrote in June 2015.

    Your three articles today bring together situations I've been questioning for years; the pension system, since I first came to Greece (I was working in West Africa) in 1959 as wife of a Greek; more recently the banking mess; and most recently the shipowners and other wealthy Greeks who operate outside Greece.

    Stuff which should have been sorted out years ago.