Some Greek entrepreneurs have moved their businesses abroad to survive the austerity measures visited upon them, including a 29% tax rate that Greece was compelled to adopt as part of an international bailout agreement.
The debt crises plaguing Greece and several other European countries has led to drastic spending cuts and tax increases in an attempt to improve government finances. But higher tax rates have put businesses under duress, compelling many to either shut down altogether or move to countries with lower tax jurisdictions, such as Bulgaria or Cyprus. This has helped those economies but undermined the recovery money so badly needed to balance the books in Greece.
According to Reuters, the number of Greek businesses that have set up in Bulgaria where the corporate tax rate is as low as 10% has skyrocketed to 17,000 from a modest 2,000 in 2010, the time of Greece’s first bailout.
In an attempt to address the situation, the Greek government, in cooperation with Bulgaria, has planned a series of tax audits to determine whether the corporate defections are merely changes of address to dodge taxation or a physical relocation of operations.
Mr. George Pitsillis, head of Greece’s Public Revenues Agency, said that many Greek businesses in neigboring countries are still economically active in Greece, using Bulgarian shell companies. “They may soon be in the unpleasant position of paying tax in both countries, plus fines,” he said.
According to the Greek Embassy in Sofia, businesses that have emigrated to Bulgaria from Greece are reported to generate roughly 5 billion euros annually and to employ an estimated 53,000 people. What’s more, Greek businesses are flocking to Bulgaria in droves, as reported by the Bulgarian Registry Agency, with a staggering 3,642 registered this year alone, up from 3,262 for all of 2015.
