Government, SEV agree on development law provisions

After making mutual concessions, the government and the Federation of Greek Industries (SEV) agreed yesterday on the content of the new so-called «Development Law,» a series of investment incentives provided to domestic and foreign companies. The new law, which replaces legislation dating from 1998, will be submitted to Parliament next month and will come into force at the beginning of 2004, Economy and Finance Minister Nikos Christodoulakis told reporters after the meeting, attended by SEV Chairman and Executive President Odysseas Kyriakopoulos and Christos Polyzogopoulos, head of the General Confederation of Greek Labor. Christodoulakis partly accepted a demand by Kyriakopoulos to allow investors to accumulate tax-exempt cash reserves from their profits beginning in 2003 and not in 2004, as the original draft law stipulated. Christodoulakis attached conditions to that which did not fully satisfy SEV. Christodoulakis dismissed SEV’s demand for a decoupling of the subsidies from the requirement to create jobs. Despite this, SEV sees the present law as a distinct improvement over the previous one. «Our country needs investments… This law provides a better framework (for investments)… I think we have exhausted the dialogue and we are waiting for the quick implementation of the law,» Kyriakopoulos said. The new Development Law 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. 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 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.