Greek busi­nesses mov­ing abroad to avoid aus­ter­ity

Kuwait Times - - BUSINESS -

Greek busi­ness­man Prokopis Makris be­lieves mov­ing to Bul­garia three years ago was the best de­ci­sion he ever made. The ac­coun­tant shut his fail­ing fur­ni­ture com­pany in Greece and opened a busi­ness help­ing other en­trepreneurs move to Bul­garia to es­cape a 29 per­cent tax rate, which has jumped since Athens adopted aus­ter­ity as part of an in­ter­na­tional bailout.

“We are bom­barded with taxes in Greece, busi­nesses are be­ing an­ni­hi­lated,” he says in his plush of­fice over­look­ing the town square of Petritsi, a Bul­gar­ian town about 12 km (seven miles) north of the bor­der with Greece. The debt crises faced by Greece and sev­eral other Euro­pean coun­tries led to dras­tic spend­ing cuts and tax in­creases to im­prove govern­ment fi­nances. But the higher taxes pun­ished busi­nesses forc­ing many to shut or move to lower tax ju­ris­dic­tions such as Bul­garia or Cyprus, help­ing those economies but un­der­min­ing the re­cov­ery needed to bal­ance the books at home.

The num­ber of Greek owned busi­nesses based in Bul­garia, where the cor­po­rate tax rate is only 10 per­cent, has risen to 17,000 from 2,000 in 2010, when Greece had its first bailout, ac­cord­ing to Bul­gar­ian au­thor­i­ties. The Greek govern­ment is con­cerned. It plans a se­ries of tax au­dits in co­op­er­a­tion with Bul­garia to de­ter­mine if these busi­ness de­fec­tions are merely changes of ad­dress de­signed to avoid tax rather than a phys­i­cal re­lo­ca­tion of op­er­a­tions.

“Many Greek busi­nesses in neigh­bor­ing coun­tries may ac­tu­ally be most eco­nom­i­cally ac­tive in Greece,” said Ge­orge Pit­sil­lis, head of Greece’s Pub­lic Rev­enues Agency, adding that he sus­pected many firms were us­ing Bul­gar­ian shell com­pa­nies. “They may soon be in the un­pleas­ant po­si­tion of pay­ing tax in both coun­tries, plus fines.” Busi­nesses re­lo­cated from Greece gen­er­ate about 5 bil­lion eu­ros ($5.3 bil­lion) an­nu­ally and em­ploy an es­ti­mated 53,000 peo­ple, ac­cord­ing to 2014 data from Greece’s em­bassy in Sofia. Numbers are ris­ing fast: 3,642 Greek busi­nesses have been reg­is­tered in Bul­garia so far this year, up from 3,262 for all of 2015, ac­cord­ing to the Bul­gar­ian Reg­istry Agency.

Bul­garia says it will share tax de­tails with Greece to help the au­dits. A bi­lat­eral tax treaty says a com­pany can­not be taxed in both coun­tries and the tax domi­cile is de­ter­mined by wher­ever its prin­ci­pal ac­tiv­ity is lo­cated. “If needed, we will co­op­er­ate with the Greek tax au­thor­i­ties un­der the mech­a­nisms for ex­change of tax in­for­ma­tion be­tween EU mem­ber states,” Rosen Bach­varov, spokesman for Bul­garia’s na­tional rev­enue agency, said when asked about the au­dits.

“Land of op­por­tu­ni­ties”

Six hun­dred kilo­me­tres (372 miles) north of Athens, the Greek-Bul­gar­ian bor­der is teem­ing with traf­fic. A ravine through mountains on the Greek side gives way to a sweep­ing val­ley where agri­cul­ture and vine­yards are the main­stay of the lo­cal econ­omy.

At two small in­dus­trial parks 5 km in­side Bul­garia, Greek signs are ev­ery­where, advertising stor­age and of­fice space. “There are dozens of Greek busi­nesses just in this area alone, from trans­port com­pa­nies to tex­tile busi­nesses and con­struc­tion ma­te­ri­als,” said Yior­gos Kalait­zoglou who runs a lo­gis­tics busi­ness out of one of the in­dus­trial parks where a sign reads, “Land of Op­por­tu­ni­ties”.

Three years ago, his busi­ness was stuttering in Greece. He moved to Bul­garia, leav­ing his wife and fam­ily in Thes­sa­loniki, Greece’s sec­ond largest city an hour’s drive away. “The tax­man in Greece takes 70 to 90 per­cent of earn­ings, Greece sim­ply doesn’t let you live,” the 50-yearold said as he walked through a ware­house stacked with lad­ders and paint tubs. It took him a few days to reg­is­ter his com­pany in Bul­garia. Eighty per­cent of the goods he han­dles is im­ported from other Euro­pean states and then ex­ported to his cus­tomers in Greece. A sole trader, Kalait­zoglou now nets about 50,000 eu­ros a year after pay­ing the 10 per­cent cor­po­rate tax, a 5 per­cent tax on div­i­dends and about 100 eu­ros a month in pen­sion con­tri­bu­tions.

Ser­res, a town of just un­der 100,000 peo­ple on the fron­tier, has been hit by busi­ness flight. Mem­ber­ship of the Ser­res Cham­ber of Com­merce and In­dus­try has fallen to 10,000 from 17,000 pre-cri­sis as busi­nesses have closed. Of the 7,000 that shut, 1000 went to Bul­garia, the cham­ber’s pres­i­dent Chris­tos Me­glas said. The de­par­tures have con­trib­uted to a rise in unemployment to 29.1 per­cent in 2015 from 13.8 per­cent five years ear­lier. Per capita GDP has fallen 15 per­cent to 9,676 eu­ros for the re­gion, the sec­ond­low­est in Greece. It was 11,421 eu­ros in 2008. “Ser­res is a liv­ing ex­am­ple of how the rich be­came poor ... we were one of the rich­est pre­fec­tures, now we are among the poor­est,” said Me­glas. — Reuters

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