ECONOMY

?Head tax? skewing competition in cruise industry

Cruise professionals in Greece acknowledge the efforts that have been made to fully liberalize the sector, but believe that the job has not been done as completely as it should have in a new draft law set for submission to Parliament.

The main objection they have with the bill is that the law continues to contain a controversial ?head tax,? by which non-European Union flagged vessels have to pay a 3.95-euro tax for every passenger, rendering them automatically less competitive than their counterparts sailing under EU member states? flags. Given that cruise liners hold an average of 2,500 passengers, this tax places a considerable burden on non-EU flagged ships every time they dock in Piraeus, which for most using Greece?s biggest port is at least five times a month.

So, instead of a complete lifting of cabotage, as the rest of the world perceives it at least, the message that Greece is sending, because the issue has not been handled correctly, is that it is again and without reason putting off harmonizing competition by the complete eradication of outdated obstacles to institutional reform.

What this head tax means in effect is that, for example, a non-EU company like MSC (which, however, does have a few EU-flagged vessels) and a European-based company like Costa Crociere receive unequal treatment by the authorities at Piraeus port.

According to the draft law, the former, because it sails under the Panamanian flag, will have to pay a head tax for every passenger on its cyclical cruise that uses Piraeus as a home port, while the latter, which is Italian, is exempt from this extra cost. This means that the two companies, which are in competition in the same market and face no forms of discrimination at the home ports in Italy or Turkey, have unequal rights in Piraeus only when using it as a home port, as MSC will have a much higher cost burden than Costa Crociere, and this at a time of deep recession.

Professionals in the industry argue that the state must abolish the passenger tax immediately in order to attract to Greece?s ports major cruise operators that are waiting to see whether the head tax will remain or be scrapped, as it has been all over the world, and especially in the ports that pose Greece?s strongest competition.

In fact, they say that companies like MSC, NCL and Royal Caribbean (which has expressed an interest in investing in port infrastructure projects) are waiting to see what the outcome will be in regard to the head tax law. If it passes, there is a serious danger that these and other companies will choose cheaper ports in the Mediterranean, such as Istanbul, where Turkey is in the process of constructing a state-of-the-art facility for cruises ships, without levying any additional costs.

Professionals in the cruise business say that if the government insists on this cash-minded policy toward cruises, then it should do so in a way that does not crush the free competition it purportedly wants to establish. If the government considers levying a fee for cyclical home porting such a necessity, according to experts, the correct procedure would be to impose a small fee on all vessels, irrespective of the colors they fly, so that there can be no claims that the country is promoting protectionist measures and granting an unfair competitive advantage to specific companies.