WHEN Panagiotis Korfoksyliotis set up a business in Athens in 2011, ferrying tourists around by car, he hoped to do his bit to help Greece emerge from its deep recession. He says he paid his staff a decent wage and declared all his earnings. Unfortunately, the taxman did not repay the kindness. Sharp increases in business taxes have prompted Mr Korfoksyliotis to pack his bags and move his company and his life to Bulgaria. Now he employs drivers to take foreign visitors around that country’s tourist spots instead.
He is part of a growing trend. In recent years Greek governments desperate for cash have sought to squeeze it from companies, despite evidence that this is driving them away to places like Bulgaria, Cyprus and Albania. The combination of a deep recession and rising taxation has meant that by some estimates more than 200,000 businesses have closed or in some cases left Greece since then. Between 2009 and 2014 the taxable profits declared by the country’s businesses fell by more than €5 billion ($5.6 billion) to €10 billion.
Precise figures are hard to find, but accountants, lawyers and businesspeople reckon that perhaps as many as 10,000 Greek-owned firms have moved abroad. In a recent survey of 300 firms, Endeavor Greece, a non-profit organisation that helps entrepreneurs, found that more than a third had either left or were thinking about going. Venetis, a bakery chain, recently said that, because of high taxes and capital controls, it will focus more on opening shops abroad than in Greece.
Even if they have kept their Greek operations going, some multinationals have moved their headquarters. Fage International, a dairy firm, said in 2012, when taxes started to rise, that it would move its base to Luxembourg. That year Coca-Cola Hellenic, which distributes the American giant’s soft drinks in 28 mostly European countries, moved its base from Athens to Zug in Switzerland. In 2013 Viohalco, a metals-processor, moved its head office to Brussels. The latter two firms say that the main reason was to improve their access to capital. But Greece’s sharp tax rises were hardly an inducement to stay.
Other euro-crisis countries, such as Portugal and Ireland, cut business taxes or kept them low, to encourage investment and growth. (Portugal’s corporation-tax revenues are only slightly below where they were, as a share of GDP, before the global financial crisis.) But Greece has raised its corporation-tax rate from 20% in 2012 to 29% in 2015, even though international lenders such as the IMF will surely have advised against this. Greece’s tax rise makes Bulgaria’s rate of just 10% even more alluring; likewise Cyprus’s 12.5% rate and Albania’s 15%.
The country’s neighbours are delighted that it is sending business their way. Panagiotis Pantelis, an accountant in Athens, says he has been busy in recent weeks meeting officials from neighbouring countries on behalf of clients looking to move out. Alexandros Ziniatis of Viva Trust, a firm that advises businesses seeking to relocate within Europe, reports similarly brisk interest from Greek companies.
The new leader of Greece’s conservative opposition, Kyriakos Mitsotakis, has condemned the tax rises on business as counterproductive. But the left-wing ruling coalition is not listening. It is now proposing a 20% rise in a levy on companies’ profits that goes toward pensions. Carry on in this vein, and there will not be many businesses, or much profit, left to tax.
