ECONOMY

Entrepreneurship bill lacks sufficient teeth

The government yesterday made public the draft bill on entrepreneurship and competitiveness, a measure in line with its efforts to improve Greece’s competitiveness and raise the Greek standard of living to the eurozone average by the end of the decade. But economists said the endeavors were not sufficient to help sharpen Greece’s corporate edge, nor enough to put living standards on par with other eurozone countries within the set timeframe. The thrust of the draft bill is aimed at encouraging listed companies to merge, on the premise that critical mass is vital to help local businesses compete on a European level. The bill sets out tax breaks for companies planning to merge over the next three years, reducing their corporate tax rate by 10 percentage points in the first year after their merger and by 5 percentage points in the following year. Such companies will also be encouraged to invest to upgrade their products and services as the bill contains a provision allowing them to channel profits generated between 2002-2005 into a special tax-free fund for this purpose. The draft bill also hopes to spur companies to focus more on research and development activities, with a clause providing for R&D spending between 2002 to 2004 to be deducted from net profits. Bowing to longstanding requests from ocean-going shipping companies, the draft law sets out a lower corporate tax rate for this sector. It also provides for lower tax rates for companies, tied to their ability to create jobs. Miranda Xafa, economist at Schroder Salomon Smith Barney, said the limited measures contained in the draft bill «won’t do the trick in promoting entrepreneurship.» She suggested the State could do a lot more good by turning its attention to the mass of paperwork stifling local businesses and driving away foreign investors. «The government should streamline procedures for launching start-ups and for attracting foreign direct investments. Complex procedures in turn give rise to corruption,» she said. A European Commission survey conducted in November last year found that Greek businesses face some of the highest start-up costs among eurozone countries. The minimum administrative charge for setting up a company and the minimum amount of capital required is three to seven times more than those in the majority of EU states. While countries like Ireland and Germany have slashed their corporate taxes with much success, Xafa said the Greek government’s ability to use the tax weapon to encourage entrepreneurship is «constrained by its limited success in curbing spending.» The draft law includes a provision bringing forward the adoption of international accounting standards by listed companies before the EU’s 2005 deadline. The move is expected to facilitate comparison of corporate results with other eurozone companies and help attract foreign investors. The bill was scheduled to be tabled in Parliament last night.