Reuters — Greek business tax levels of 29% cause businesses to shut down or move to lower tax countries such as Bulgaria or Cyprus, helping those economies, but undermining the recovery needed at home.
The number of Greek owned businesses in Bulgaria, where the corporate tax rate is 10 %, has risen to 17,000 from 2,000 in 2010, when Greece had its first bailout, according to Bulgarian authorities.
Businesses relocated from Greece generate about 5 billion euros 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 the whole of 2015, according to the Bulgarian Registry Agency.
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.
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 the location of its principal activity.
Six hundred kilometres north of Athens, the Greek-Bulgarian border is teeming with traffic.
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, 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-year-old 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.
Vassilis Kampanis, president of the Greek Federation of Tax Advisers, says his office has been inundated by queries from Greeks seeking to change their tax domicile to Bulgaria.
Tax cuts and a simpler system for establishing companies in Greece are the only way to lure businesses back, he said.
But tax reductions appear unlikely. This year alone, Greece approved a raft of new tax and pension contribution increases under the terms of its third bailout, while new measures maybe required in the next two years to meet the lender’s targets
In Petritsi, a pretty town of 31,000 residents, Greeks mingle at the Akropolis coffee shop which has two Greek flags hanging from a balcony.
Vaggelis, the owner of the coffee shop who declined to give his last name, moved to Bulgaria after Greek authorities fined him 3,000 euros for being late in registering a worker.
“In Greece its just take, take, take.”
But his face crumples when asked if he misses Greece.
“I feel awful for living here. But I have children to support. Greece gave me no choice.”
