Bailout Reforms Put Heavy Pressure on Greece’s Shipping Industry

Greece’s world-leading shipping industry is coming under increasing pressure to carry a big part of the new taxes the new bailout agreement requires.

The Greek government has agreed to raise taxes on the long-protected sector of shipping, “a part of Greek culture that it has tax breaks enshrined in the constitution,” a Wall Street Journal report says.

The shipping industry is dominated by a small circle of family run companies that control almost one fifth of the world’s shipping fleet, putting Greece’s trademark in all seas.

Greek shipping has been a badge of pride for the country. However, the economic crisis has made shipowners more of a target than recipients of public admiration.

“The country’s shipping community must be ready to lift the heaviest of burdens to help the country out of the economic crisis,” Merchant Marine Minister Thodoris Dritsas told a gathering of owners in January, shortly after the left-wing SYRIZA party took office, says the WSJ report.

But industry executives and supporters say higher taxes threaten to drive away a business that employs more than 200,000 people and contributes around 7.5 percent of Greece’s gross domestic product. By comparison, tourism directly contributes about 600,000 jobs and 9 percent of GDP.

As part of negotiations with creditors for a third bailout, the Greek government has agreed to increase the tonnage tax—a flat, annual rate, based on a ship’s capacity, that is now roughly harmonized across the European Union. Greece also would gradually abolish some tax benefits that other EU countries also offer, the report says.

“If there is a change in the tax and legal framework under which shipping operates in Greece, I would certainly expect a mass exodus by owners. That’s what I will do,” said Michael Bodouroglou, who runs a fleet of 25 dry-bulk and container vessels through two New York-listed companies, Box Ships and Paragon Shipping.

According to the report, the prospect of higher taxes comes at a bad time for the global shipping trade. It is currently being hurt by low freight rates, steep competition on pricing and an abundance of ships sailing the world’s oceans.

Nevertheless, shipping is one of the few areas in Greece that is still hiring, at good wages, in a country where unemployment exceeds 25 percent. According to the Union of Greek Shipowners, revenue generated by Greek shipping totals about 13 billion euros annually. Over the past three years, the industry paid tonnage taxes of more than 100 million euros annually, according to a government official.

According to the report, in 2013, under government pressure to do more for the economic crisis, Greek shipowners agreed to double that for four years—contributing an additional 420 million euros through 2017.

Counting those payments, “the Greeks now pay the highest tonnage tax in Europe,” said Basil Karatzas, a New York-based maritime adviser.

But Europe thinks differently: “The Greek shipping industry is very successful and should contribute more to national coffers,” an EU official said.

The lavish lifestyles of some shipowners have provoked strong reactions amid crisis-stricken Greeks. “We are up against years of mistrust from the Greeks, personified in the new government,” Bodouroglou said.

Source: greekreporter.com