ECONOMY

Greece, Turkey reach key economic cooperation pact

After negotiations lasting five years, Greece and Turkey yesterday signed an agreement resolving double taxation issues and setting an important basis for boosting economic ties. «The framework that has been established is adequate and effective and there is no excuse for lack of economic cooperation now,» said Economy Minister Nikos Christodoulakis after meeting with Turkish Prime Minister Recep Tayyip Erdogan in Ankara. The treaty, which the Economy Ministry described as «the most important toward economic cooperation» ever signed between the two historical rivals, completes a legal framework for bilateral investment and the facilitation of economic transactions that have been gradually built in recent years as political tension has thawed. Turkish Finance Minister Kemal Unakitan said he expected a spectacular growth in bilateral economic relations. «We are looking forward to a doubling or even tripling of economic transactions,» he said. Christodoulakis noted both countries’ high growth rates. Greece’s economy is projected to grow by around 4 percent this year, the highest rate in the EU, and Turkey’s by about 5 percent. The agreement is seen as boosting Greek shipping, a major part of the country’s economy. Turkey accepted the criterion of Greek flag ownership for taxation purposes and Greek vessels will now no longer have to pay a 6.5 percent tax on cargos loaded in Turkey. Also, shareholders in Greek companies active in Turkey will enjoy a slightly preferential tax on dividends (15 percent), compared to those of Turkish companies (16.5 percent). The measure is seen as an incentive for Turkish businesses to invest in Greece, where there is no tax on dividends (only 35 percent on corporate profits). Greek firms’ branches, as opposed to subsidiaries, in Turkey will be taxed on par with dividends, at 15 percent. The pact sets a 12 percent tax rate on interest income; provides that profits from insurance services will be taxed through local representatives; and that income of offshore companies is taxed only if their activities last more than 30 days. Construction companies will enjoy a 10-month tax-exempt period (Turkey wanted 18 months). Trucks with goods from one country transiting the other will only be taxed in their country of origin. Finally, the pact waives the 12 percent tax on interest on bank loans for investment in infrastructure and heavy industry for five years, a measure that seeks to boost capital flows between the two countries. Christodoulakis was accompanied by SEV Chairman Odysseas Kyriakopoulos.