Greek Merchants Cry Foul as Netflix, Airbnb Escape New Taxesby
Forthnet CEO says new pay-TV levy creates unfair competition
Taxes on income, consumption rise under latest bailout deal
For Panos Papadopoulos, what’s worse than the Greek government’s new taxes is that they don’t apply to his overseas rivals.
The chief executive officer of Forthnet SA, Greece’s biggest pay-television company, says the new levies make his battle against the likes of Netflix Inc. even harder. The story is similar for hotel-industry executives who say they face higher taxes that Internet-based services like Airbnb Inc. escape.
For its latest bailout tranche from creditors, Greece has reached deeper into its economy and is raising taxes on everything from beer, Internet use, phone services to pay-TV. It has increased the general sales levy and income taxes, prompting businesses to say growth will be damped in an economy that has shrunk by more than a quarter since 2008. Executives like Papadopoulos say what’s more galling is that the new levies give companies operating outside Prime Minister’s Alexis Tsipras’s jurisdiction an edge.
The taxes “will lead to extremely burdensome conditions of unfair competition in favor of foreign companies that offer similar services over the Internet and their revenues are not taxed in Greece,” Papadopoulos said. The pay-TV levy will “create unprecedented adverse market conditions hampering the competitiveness of the Greek pay-TV industry.”
The increased taxes were a part of a deal between Tsipras’s government and representatives of the euro area and the International Monetary Fund. The government has said the agreement will restore confidence in the prospects of Greece’s economy and boost liquidity, thus offsetting the impact of the additional belt-tightening.
“The new fiscal measures won’t help to revive the recovery but the relative normalization of relations with the creditors could,” said Maxime Sbaihi, an analyst at Bloomberg Intelligence. “It looks like the first-review hurdle will be cleared just before the tourist season and that could help restore some confidence.”
Europe’s most indebted state is set to get 10.3 billion euros ($11.5 billion) in additional loans from the currency bloc’s crisis fund following the deal, while the Governing Council of the European Central Bank may examine restoring access to the ECB’s cheap financing lines for Greek lenders in its next policy meeting.
Greek executives say these benefits could have been reaped without overburdening companies with excessive taxes, which may derail a long-anticipated economic recovery.
Under the latest belt-tightening package, the general sales tax rate was raised to 24 percent as of June 1, while low rates for some of the country’s most popular tourist islands in the Aegean Sea were abolished. The government also doubled a special consumption tax on beer, raised registration fees for some cars and introduced a 10 percent levy on pay-TV bills.
Most salaried workers and low-income pensioners will also see their take-home pay shrink as of this month as income taxes are increased and social benefits are cut. There will be more fiscal tightening ahead, including a levy on land-line phone and Internet subscriptions.
For Papadopoulos, the unfairness of the pay-TV tax is evident. The company has about half a million subscribers. A pay-TV subscriber in Greece pays about 62 euros a month for a bouquet of channels, including movies, sitcoms and other programs as well as a land line. According to Forthnet’s website, the company has started charging an additional 6.2 euros a month for the pay-TV levy. In contrast, a user of the Internet-based service Netflix Inc, which was rolled out in Greece earlier this year, pays 7.99 euros a month for a basic service or 11.99 euros for a premium offering.
A spokesman for Netflix declined to comment on the pay-TV tax. The U.S. company levies a sales tax on subscribers that it pays the Greek state. A spokesman for the Greek finance ministry said Netflix doesn’t offer the same services as local pay-TV providers and it is not based in Greece, so it can’t be taxed on the income it makes locally.
The pain of the new taxes is also being felt in the hotel industry. In addition to increases in corporate and sales taxes, Greece’s tourist industry, which contributes about 18.5 percent to the country’s gross domestic product, will be subject to a hotel occupancy levy as of 2018, according to a bill passed last month.
“While the state overtaxes regulated tourist resorts to asphyxiation, it loses at least 300 million euros of revenue from the uncontrolled lending of private residences to visitors,” said Andreas Andreadis, president of the Greek Tourism Confederation.
With the new levies, the government hasn’t managed to safeguard rules of “tax symmetry” between hotels and peer-to-peer services like Airbnb, according to Andreadis, whose SETE lobby group represents 50,000 tourism-related businesses.
Airbnb, which lists thousands of private properties for rent in Greece for an average price of about 100 euros a night in June, asks hosts who use its platform for listings to ensure they pay all the required local taxes. A spokesman for Airbnb didn’t respond to two e-mails seeking comment. The Greek Finance Ministry is consulting with peer-to-peer providers of hospitality services for the effective taxation of individuals making an income from renting residences to tourists, a spokesman for the ministry said.
Greek shares have rallied on the agreement between the government and its creditors. Last month, the Athens Stock Exchange was one of the best performing major gauges tracked by Bloomberg, behind only Nigeria’s stock market. Greek bonds have delivered the highest returns in the past month of all sovereign securities tracked by Bloomberg’s World Bond Indexes.
Overburdened Greek companies have been less enthusiastic. The increase in the excise tax on beer will lead to job losses and deal a devastating blow to one of the most dynamic sectors of the Greek economy, the Hellenic Association of Brewers said in a statement last month. The final retail price of beer will rise by 20 percent, it said.
For Forthnet’s Papadopoulos, the additional taxes may backfire, reducing government receipts by forcing Greeks to consume less.
“The state will end up losing significant revenue by imposing such excessive taxes,” he said.