Greece is offering big investors more than a decade of no increases in their taxes, in an effort to promote entrepreneurship in a country struggling to return to growth after almost seven years of recession.
Greece has been imposing austerity, as part of three consecutive bailout programmes, since 2010. Partly as a consequence, gross capital formation, which shows inventory replacement and spending on fixed assets such as buildings and machinery, has declined about 65 percent since 2006.
To reach 2009 levels of fixed capital formation, Greece would need to invest at least 79 billion euros ($90 billion). That is more than it can afford, the finance ministry said last week, when it submitted a draft law that offers different incentives for setting up a business.
Under the law, investment plans exceeding 20 million euros and creating at least 40 new jobs could choose a stable tax regime with no tax increases for 12 years once the investment is concluded.
Alternatively, they can apply for a subsidy, amounting to 10 percent of the plan and up to 5 million euros, either in cash or in the form of a tax exemption.
In both cases, the investments can be eligible for a fast-track licencing process.
“Big foreign investments don’t need funding. They need stability,” Economy Minister George Stathakis told reporters, presenting the proposed law.
“If a Greek government raises taxation, they will be protected. But if taxation goes down, they will enjoy the same favourable treatment that will apply to the others.”
Greece ranks 60 out of 189 world economies in ease of doing business and 54 in starting a business, according to a World Bank 2016 report. The necessary licensing for setting up a business can take anywhere from several months to years.
Stathakis said that Athens will seek to shorten approval time for investment plans to three months instead of the two to three years it takes now.
Athens increased taxation on corporations last year to 29 from 26 percent. As part of its bailout package from the European Union and International Monetary Fund, Greece is also raising a sales tax and plans to raise taxes on corporate dividends to 15 percent from 10 percent as of next year.