The European Union Tax Observatory qualified Greece’s non-domicile scheme as a particularly harmful form of tax competition, in a report that has provoked a reaction from the Greek Finance Ministry.
The scheme is aimed at attracting foreign taxpayers with high incomes to Greece, with the ministry noting that the taxation of individuals is the competence of each member-state and the scheme’s clauses follow the models of the Organization for Economic Cooperation and Development.
The latest report by the EU Tax Observatory, released on Monday, said the most harmful tax regimes for individuals in the EU are those of Greece and of Italy, granting tax residence to foreigners.
Behind Greece’s and Italy’s systems, there is also a mention of Cyprus’ system for attracting high-income foreigners, but also the incentives for wooing foreign retirees to Greece, Cyprus and Portugal. The report says some 200,000 currently benefit from such tax systems in the EU, with the cost in tax revenues estimated at 4.5 billion euros per year.
The report notes that Greece and Italy offer tax privileges for more than eight years, appealing to “high net worth” individuals, without asking for any activity in the local economy.