In Hellenic Shipping News 05/02/2016
These measures were introduced to encourage EU ship-owners to flag their ships and carry out ship-management activities in the EU, rather than relocate those activities outside the EU. However, in order to avoid subsidy races between Member States and limit the distortions of competition created by the state support, these provisions need to be applied consistently throughout the EU and comply with the conditions set out in the Maritime Guidelines.
Existing aid procedureThe Greek scheme has been in place since 1975, which is before Greece’s accession to the European Union. It is therefore considered as ‘existing aid’ and subject to a specific cooperation procedure. Today’s decision is the second step in this procedure. In 2012, the Commission started the existing aid procedure by expressing, in a service letter, its preliminary concerns concerning the compliance on the Greek legislation with EU state aid rules. This was followed by exchanges with the Greek authorities.Greece and the Commission will now jointly explore how to adjust the Greek tonnage tax scheme to end distortions of competition within the Single Market. Greece has two months to inform the Commission whether it will agree to the proposed measures. If Greece accepts the proposed measures, the Commission will confirm this in a separate State aid decision. Failing an agreement, the Commission may open a formal state aid investigation”, the Commission had concluded.
The Union of Greek Shipowners (UGS) held its annual meeting mid-week, with the President and owner of Golden Union, among others, Mr. Theodore Veniamis, stating that the demise of the dry bulk market, which has resulted in record low rates over the past few months of 2015 and into 2016, isn’t bound for a recovery anytime soon. He was talking about the challenges, both domestic and global, which the Hellenic shipping industry had to deal with during 2015.
Commenting on the Greek shipping’s state after a tumultuous 2015, Mr. Veniamis noted that the Hellenic-owned fleet has kept growing in numbers, despite the record lows of the dry bulk market and the capital controls which were set in place in Greece at the end of last June and which created a lot of uncertainty and turmoil, leading to a drastic fall of over 50% in the currency earnings from shipping activities (down to 2.27 billion euros for the July-October 2015 period). Nevertheless, today, the Greek fleet stands at around 4,500 vessels, which amounts to about 19.63% of the global fleet and almost 50% of the EU fleet.
As such, Mr. Veniamis appeared very unhappy regarding the latest decision by the European Commission to call for Greek authorities to offer proposals regarding the amendment of the “beneficial” taxation framework of the shipping community. In particular, the EU has deemed as illegal, among other things, the non-taxation of dividends which are distributed by shipping companies to their shareholders/owners, the non-taxation of surplus value related with holding shares in shipping companies, as well as the relief of those companies from having to pay for an inheritance tax”.
Mr. Veniamis said that this stance by the EU is quite hypocritical, as the legal uncertainty and investment insecurity which are caused to the shipping community, could lead to relocation of shipping companies, not only from Greece, but by the EU in general, in order to move to more “hospitable” international maritime clusters. He added that the framework which is deemed as illegal, is the same – more or less – with other maritime nations in the EU. If the Commission is set to investigate similar frameworks across the EU, as it has declared, “then I’m afraid that the European lawmakers haven’t learned from past mistakes, which led to the destruction of the shipbuilding industry of the EU”.
According to UGS, the Hellenic shipping framework was in place prior to the acceptance of Greece in the European Union and was fully recognized in 198 by the EU, when the country formally became a member state. UGS also noted that it hasn’t been doubted so far, being an integral part of the country’s policy to attract investments in the shipping sector. They added that the latest investigation by the DG Comp isn’t based on any official complaint. The shipping industry was never part of the problem of the Greek debt, quite the opposite, as evidenced by its contribution to the current account deficit of the country”, said Greek shipowners. They also reiterated that the Greek shipping framework was set in place back in the fifties and was adopted by the country’s Constitution of 1975, after the overthrowing of the dictatorship.
Earlier last month, the European Commission had sent Greece a set of proposals to ensure that state support to the maritime sector in Greece complies with EU state aid rules. In particular, the Commission found that current provisions may breach EU state aid rules by allowing shareholders of shipping companies to benefit from favorable tax treatment that should be reserved for maritime transport providers. Similarly, the Commission is concerned that favourable tax treatment is also extended to maritime sector intermediaries and operators of ships, which do not provide maritime transport services.
The announcement read that “the Commission acknowledges the importance of maintaining a competitive maritime transport sector in the EU. EU state aid rules establish common rules on how Member States can support maritime transport providers, without unduly distorting competition in the Single Market. In particular, the Maritime Guidelines enable Member States to tax shipping companies on the basis of the tonnage of the fleet (i.e. based on size of shipping fleet) rather than the actual profits of the company.
The Commission has concerns that the Greek tonnage tax system is not well targeted and benefits the shareholders of shipping companies as well as companies other than maritime shipping companies, beyond what is permitted under the Maritime Guidelines. The Commission has therefore asked Greece to review which vessels are eligible under its system and exclude fishing vessels, port tugboats, as well as yachts rented out to tourists without a crew from the preferential regime. Operators of such vessels should in future be subject to the standard income tax.
Nikos Roussanoglou, Hellenic Shipping News Worldwide
