ECONOMY

Development law provides more investment incentives

In an attempt to boost private investment, both domestic and foreign, the government is taking a chapter out of the «neoliberal» Irish model it has rejected in the past. The new Development Law submitted to Parliament yesterday proposes a 10-year favorable tax regime to companies investing over 30 million euros. Corporate tax in this case will be slashed to 25 percent, instead of the 35 percent applicable in all other cases. This favorable regime can be extended to lesser investments, provided the amount invested exceeds a company’s fixed assets. Also, the government accepted a proposal by the Federation of Greek Industries (SEV) not to link subsidies for investors to the creation of jobs. The linkage is not entirely severed, but the new provisions are far more flexible. SEV officials have long insisted that this «decoupling» was necessary for any development law to be really effective. Tax inspections on such investors will be simplified; they will be conducted by a new directorate, the Big Investments Unit, which will be part of the Economy and Finance Ministry’s National Inspection Center. The new unit will be staffed by experienced personnel specializing in inspections of big companies, including multinationals. Any disputes arising from tax inspections will be resolved by an independent commission, in which SEV will be represented. Besides the favorable, and stable, tax regime, the new development law differs from its predecessors on the following points: There are better incentives for large investors as well as companies with significant international activity. The upper limit of state subsidies for investments involving the creation of new manufacturing units – until now set at 15 million euros – is abolished when the investment exceeds 40 million euros and a minimum of 200 new jobs are created. Alternately, the upper limit is abolished in case of investments exceeding 15 million euros and creating at least 75 new jobs, if the majority of shares in the investor are held by companies with a minimum turnover of 30 million euros from activities abroad. Investors involved in modernizing hotels will get a maximum subsidy of 10 million euros, from 4.5 million under the current incentives regime. There will also be an abolition of the upper subsidy limit, including a leasing subsidy, on investments in new and advanced technology products. Higher incentives are also provided for «old» investors, that is those whose investments have been running for at least five years. These investors are allowed to create special, tax-exempt reserves equal to 35 percent of their total undistributed profits with the restriction that they must invest at least that much money over the next three years. If old investors wish to expand their operation and create new jobs they will also be provided with subsidies, although not as high as those given to new investors. Investors will be encouraged to locate their activities in regions lagging economically, such as Epirus. The subsidies themselves will be paid by the State as soon as the operation financed by the investment begins. The process of handing out subsidies will be simplified; the whole amount will be provided instead of in installments. The investor can receive part of the subsidy earlier, by providing a letter of guarantee. In case of investments in Balkan countries related to Greece’s national aid plan for the area, the investor is obliged to keep a minimum number of people employed in Greece.