High VAT harms competitiveness of Greek coastal shipping firms

High VAT harms competitiveness of Greek coastal shipping firms

The reduction of value-added tax on ferry tickets would give the Greek islands an economic boost without provoking a negative fiscal impact, the Foundation for Economic and Industrial Research (IOBE) argues in a study titled “The Contribution of Passenger Shipping to the Greek Economy.”

Compared to its European Union counterparts, the VAT rate on ferry tickets in Greece is one of the highest, and thus detrimental to competitiveness. This is particularly obvious in the Adriatic, where Greek coastal shipping companies have to contend with Italian ferry firms, whose tickets carry a much lower VAT rate, market professionals note.

The IOBE study concludes that the total contribution of coastal shipping to the country’s gross domestic product in 2016 amounted to 16.1 billion euros or 9.2 percent. In employment terms, the sector provided 349,000 jobs, or 9.7 percent of the total.

The expected increase in tourism arrivals from abroad creates a positive momentum. However, the rise in costs has had a negative impact on the sector’s financial results. In the medium term, the industry’s prospects are also negatively affected by the substandard port infrastructure in Greece, as most of the country’s ports are still insufficiently equipped to receive higher numbers of visitors.

Another important issue is the obligation to adjust to low-sulfur fuel as of 2020, which will result in higher costs for building, transforming and operating ships.

According to IOBE, the sector’s adjustment to the new conditions requires a systematic effort to contain operating costs while maintaining coastal shipping services at an optimum level. A big step in this direction would be cutting the VAT charged on ferry tickets: Greece has the second highest rate in the EU (24 percent) while Italy – a country with a comparable sea passenger traffic volume – has a rate of just 10 percent. The study estimates that a reduction of the VAT rate under specific terms could bolster the economy of the country’s island regions, which would be reflected in the national economy, thereby costing the state coffers nothing thanks to the increased economic activity.

Notably, Greece’s passenger shipping sector remains one of Europe’s biggest, accounting for 17 percent of all maritime passenger traffic in the EU.

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