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Taxes weighing Greek companies down, study shows

Taxes weighing Greek companies down, study shows

Greek companies were the most heavily burdened by tax in the Organization for Economic Cooperation and Development (OECD) over the last decade, according to a study by the Washington-based Tax Foundation.

The effective average corporate income tax rate decreased almost everywhere in Europe from 2008 to 2018, with Greece being among the few exceptions as it saw a rate increase of 5.8 percentage points, the study found.

Greece also ranked last among OECD countries in the category of company performance.

Of the 31 OECD countries surveyed in the study, Hungary (-8.4 percentage-points), Malta (-7.8 percentage-points) and the United Kingdom (-7.4 percentage-points) saw the most significant decreases in the effective corporate income tax rate between 2008 and 2018.

On the other hand, Greece, Latvia, and Cyprus had the largest increases in effective tax rates, at 5.8, 2.9 and 2.4 percentage points, respectively.

The study noted that, on average, the effective tax rate declined by 1.5 percent between 2008 and 2018 in all countries covered, compared to a 1.7 percent decline in the statutory rate.

Market experts said that, given the current circumstances, it is not profitable for someone to invest in Greece, as a large chunk of profits (55 percent) will go to the Greek state.The above data demonstrate that Greece must reduce corporate taxation to spur investment.

Experts said that the cost of reducing corporate tax within a two-year span so that Greece approaches the rates of Spain, the Netherlands, Portugal and Slovakia, will not be more than 500 million euros.

This cost, they said, will be covered by boosting investments that will bring greater benefits to state coffers.

They also noted that it is essential for Greece to lower the tax on dividends by 10 percentage points in order to effectively lure new investors.

Within this framework, the new government will proceed as of 2020 with the reduction of tax on profits by 4 percentage points (from 28 to 24 percent) and the simultaneous reduction by 50 percent of the tax on distributed profits (from 10 to 5 percent).

The corporate tax rate will be further reduced in 2021 to 20 percent.

Based on the above, the average tax rate on businesses (income tax and tax on dividends) will drop from today’s average rate of 35.2 percent to 27.8 percent in 2020 and 24 percent in 2021.

An indication of the current situation is the latest data of the independent public revenue authority (AADE), which show that out of 255,018 businesses, only 91,745 declared profits to the tax office.