ECONOMY

Commission hits at investment incentives

Brussels – The European Commission has found Greece’s new law on investment incentives (Law 3220 / 2004) – also known as the «Development Law» – to contain provisions incompatible with EU legislation. The law, voted in by Parliament on January 15, provides for a lowered tax rate – 25 percent instead of the usual 35 percent – for a period of 10 years for businesses, Greek or foreign, that invest in projects worth over 30 million euros. It is this centerpiece of the legislation that the EU finds objectionable. It considers this provision as discriminating in favor of certain businesses and, crucially, against small and medium-sized enterprises (SMEs) which are not able to invest large sums in a single project. Setting the bar at 30 million euros is unacceptable to Competition Commissioner Mario Monti at a time when the Commission’s priority is to help SMEs. The Commission believes that it is the SMEs that will be the main creators of new jobs and the facilitators in the development of new technologies. The Commission also takes exception to the provision allowing enterprises not included in the previous Development Law, voted in 1998, to benefit from the incentives. That law had been passed with the approval of the Commission, which thinks it ought to have been consulted on the new law. The new Development Law does not discriminate between past and future investments. This, according to the Commission, is further evidence that the tax breaks are actually a form of hidden state subsidy. Thus, even if Greece decides to challenge the Commission’s reasoning, implementing the law will be nearly impossible, because every enterprise that benefits will be faced with the prospect of remunerating the State for the taxes it has agreed to forego, if the case is decided in the Commission’s favor.