By Prokopis Hatzinikolaou

It is not so much salary costs, but rather the corporate income tax rate and the value-added tax rate that discourage foreign direct investment in Greece, according to a survey by KPMG researchers published on Thursday.

The annual survey on corporate and indirect tax rates showed that Greece pales in comparison with neighboring countries, whose tax rates are lower. KPMG has found that governments tend to raise indirect taxes in a bid to increase revenues, but that is offset by the reduction in income tax rates for companies in order to attract investors.

In an interview with Kathimerini, Deputy Finance Minister Giorgos Mavraganis had stressed the need for action to facilitate investment, saying that Greece will have to become competitive in terms of procedures and regulations. “I do not think that there has been an investment boom in Bulgaria, which has a corporate tax rate of 10 percent. Sure, a low tax rate does help, but I believe that what major investors examine are other factors such as the business environment.”

Yet according to the KPMG survey, Greece boasts the highest corporate and indirect taxation among the countries in the region. The corporate tax for 2013 profits will rise to 26 percent from 20 percent in 2012. In the countries to the north of Greece – Albania, the Former Yugoslav Republic of Macedonia and Bulgaria – the tax rate stands at just 10 percent. In contrast, there are higher tax rates in Malta (35 percent), Belgium (33.99 percent), France (33.33 percent), Italy (31.4 percent) and Germany (29.48 percent).

The main indirect tax rate (mostly VAT) amounts to 23 percent in Greece, 20 percent in Albania and Bulgaria, and 18 percent in FYROM and Cyprus. Nicosia raised its VAT rate from 17 percent on January 14. Nevertheless, Greek budget data show that the increase in indirect taxes has not led to any improvement in public revenues.