Halving tax for merging firms

Halving tax for merging firms

The government is planning to reduce or even halve the corporate tax rate for businesses planning mergers or more general overhauls, with the aim of making the economy more competitive and small and medium-sized enterprises more sustainable.

Although the incentives will come attached with strict terms and conditions, the framework will be quite flexible, without bureaucratic obstacles that would effectively cancel the entire endeavor.

According to Finance Ministry sources, some of the proposals on the drawing board include the reduction of the corporate tax rate by half, from 22% to 11%, for five years, provided that the cash saved will not be used as a dividend or turned into capital. This is because the government wants the money to be channeled to productive investments and not end up in the pockets of shareholders. The tax rate reduction would also lead to further cuts in charges such as the corporate tax deposit and the slashing of the social security contributions of employers.

The objective, per the same sources, is for SMEs with a competitiveness and productivity deficit to make the most of those measures. Injured by the pandemic, and surviving thanks to state support, they need to become stronger and sustainable, with access to bank loans and the considerable resources of the Recovery and Resilience Plan of the Next Generation EU fund.

Government officials argue that for the 12.7 billion euros of EU loans to go into private investments, Greek companies will have to grow and become large enough to reach for the loans that will be up for grabs.

According to the Pissarides Commission, 48.5% of all corporations are small, employing up to nine people, while in the European Union that rate is much lower at 29.9%.

The incentives the government is considering to convince small companies to join forces include a low tax rate for some time for merging companies, a reduction in social security contributions, depending on turnover, special assistance for exporting enterprises and attractive loan programs.

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