The Finance Ministry is attempting to make the country’s tax borders less porous for Greeks through a legislative intervention and the exchange of information with cooperating states, in a bid to put an end to the phenomenon of enterprises and professionals establishing themselves as residents of countries with lower tax rates, as well as to put pressure on businesses that have already shifted their activities abroad.
Overtaxation and high social security costs are leading increasing numbers of taxpayers and enterprises to countries such as Cyprus and Bulgaria, where tax rates come to 10 percent, against 29 percent in Greece, to say nothing of the excessive obligations to pension funds. There is a backlog of thousands of applications by taxpayers at the Tax Authority for Residents Abroad, as they seek a more favorable tax environment.
Sources say the number of applications is unprecedented, while there are also quite a few enterprises that have opened offices in neighboring countries despite not having any activities or employees there. Most are service companies aiming to reduce their tax bill.
Finance Minister Euclid Tsakalotos stated this week that in cases where a company’s business activity remains in Greece and there are no changes in its ownership and management, then the corporate emigrants would appear to be involved in bogus transfers. This is obviously an illegal practice that abuses the liberties provided by European Union law. Monitoring is expected to increase in that regard, while a regulation is currently being drawn up.
Ministry officials say that Greece will soon sign state agreements with Bulgaria and Cyprus in order to probe all those enterprises in depth. They add that hefty fines will be imposed on any companies identified as having set up entities in Bulgaria while their business activity remains in Greece. Meanwhile, the Greek government will forward data to Sofia concerning all Bulgarian citizens working in Greece so the Bulgarian authorities can establish whether any are illegally receiving benefits in that country.