ATHENS – Greek shipowners, who pay no taxes to the state but claim to have brought in $175 billion in untaxed earnings over the last 10 years, have threatened to relocate their businesses and abandon their home country if the next government assesses them with taxes for the first time. With the June 17th elections fast approaching and the possibility with it that Greece might pull out of the Eurozone if anti-austerity parties are elected, Coalition of the Radical Left (SYRIZA) leader Alexis Tsipras said that it is only fair that the industry, the world’s largest, should pay a fair share of taxes during an economic crisis that has crushed workers, pensioners and the poor. However, ship owners are balking at the statement and reiterated that they will float out of Greece and take 60,000 jobs with them.
The country’s estimated 762 vessel owners pay no tax on international earnings brought into Greece under rules incorporated in the country’s constitution since 1967. Greek maritime companies and others in related service and supply industries employ 200,000 workers, of whom almost a third could lose their jobs if local ship owners were to leave, according to the National Confederation of Hellenic Commerce. Along with vessel managers, insurance, ship repair and other industries would also be at risk, Vassilis Korkidis, the confederation’s President, told Bloomberg news agency.
Ship owners, many of whom already have headquarters and offices in other countries, including New York, and who fly flags of other nations to avoid paying taxes to their home country, are on the look out for ways to reduce operating costs and to find loop holes around Greek regulations. Industry leaders regularly threaten to flee Greece if the government tries to tax them, a practice they defend.
“Shipping is an offshore industry, and any act against it is like shooting yourself in your own foot,” Ted Petropoulos, founder of Petrofin Research, told Bloomberg. He worked in his family’s shipping business in the 1970’s and also held positions at lenders including First National Bank of Chicago before starting the ship-finance consulting firm.
Greek vessel owners remitted $19.2 billion to the country in 2010, Bank of Greece (TELL) figures in the Union of Greek Shipowners’ annual report for 2011 showed. Remittances between 2000 and 2010 came to $175 billion, according to the data, or about $17.5 billion a year, a fraction of its annual earnings. The Greek-controlled fleet numbered 3,325 vessels, or about 15 percent of the global total, the union said.
George Economou, President of DryShips Inc. (DRYS), said he’s “totally unconcerned” about possible changes to the tax exemption. The company owns a fleet of 58 dry-bulk ships and tankers, according to first-quarter results released May 29. “I wouldn’t even worry about it,” Economou said in a May 30 interview. “Your corporate office can be anywhere in the world, so they would lose a percentage of GDP,” Korkidis said. “We need Greek shipping,” and that unemployment could rise to between 20 and 30 percent in the maritime industry from less than 8 percent now if owners relocated to places such as Dubai or Singapore to avoid a new tax, he said. Greece’s unemployment rate is 21.8 percent.
Bloomberg noted that ship owners worldwide enjoy a degree of fiscal immunity because most countries levy taxes based on fleet size rather than revenue, said Victor Restis, Greece’s fifth-largest shipper. “You cannot squeeze and tackle a person that is in international shipping trade and finance and say, ‘I will tax you,’” said Restis, who controls a fleet of more than 200 vessels. “The answer is ‘sure, tax me. Find me.’”
Tax benefits for owners of international vessels who chose to base themselves in Greece were no better or worse off than those offered by other European nations including Germany, Malta, Cyprus and the Netherlands, Theodore Veniamis, the union’s President, said in a June 8 interview in Athens. A lack of government involvement helped Greece’s maritime industry to remain competitive, according to Michael Bodouroglou, Chairman of Paragon Shipping Inc. (PRGN) The Voula, Greece-based company operates 11 dry-bulk vessels and has three more under construction as well as two container ships, its website shows. “If we have tax officers visiting shipping companies, they would eventually stop being as efficient as they are now,” Bodouroglou told Bloomberg in a May 30 interview. “The most important characteristic of this business is that we’re lucky enough to have very little interaction with the state.”