“The possibility of increasing prosperity in Greece is very large, if we close the investment and productivity gaps”, emphasized Nikos Vettas, general director at the Foundation for Economic and Industrial Research (IOBE) and professor at the Athens University of Economics and Business, presenting the IOBE study on the “Specification of proposals and impact assessment” of the Hellenic Association of Entrepreneurs (EENE), at the 8th Economic Conference of EENE.

The IOBE study analyzes the EENE proposals for four specific measures:

  • Zero marginal non-salary costs as an incentive for the digital upgrade of companies’ human resources.
  • Reduced Marginal Business Taxation to facilitate business growth.
  • Gradual abolition of advance tax to avoid an increased effective tax rate.
  • Acceleration of depreciation in mechanical equipment to stimulate productive investments.

Mr. Vettas stated that “domestic manufacturing is not doing badly, there is a steady upward trend in Gross Value Added. However, we lag behind the EU.”

In terms of productivity, while in the manufacturing sector it is significantly higher than in other sectors of the economy, it still lags behind the European average, a distance that was not covered even by the improvement observed after 2020. “The reason is that the ratio of investments to GDP lags behind the rest of Europe”, explained N. Vettas, underlining that “manufacturing must rely more on technology, than on unskilled labor”, and that “manufacturing workers must constantly acquire more skills, especially digital ones’.

N. Vettas stated that in Greece the lowest percentage of companies that offer training and education programs to employees is recorded. The EENE proposal moves in this direction, proposing lower insurance and tax rates for salary increases for employees who have attended certified training programs.

If this proposal is implemented, it can lead to a total annual increase in the disposable income of households by 40 million euros, according to the “moderate calculation” as mentioned by N. Vettas, while the total annual increase in the income of businesses providing education services will rise to 14.3 million euros.

At the same time, the total annual increase in the disposable income of households will reach 1.55 billion euros, while the total annual increase in the revenues of businesses providing education services will reach 94.3 million euros.

Regarding business taxation, N. Vettas stated that Greece is close to the European average in the taxation of business profits, while the taxation of dividends is among the lowest worldwide.

Regarding the EENE’s proposal for reduced taxation of fast-growing manufacturing companies, when profits exceed the average of the last three years plus the nominal GDP growth rate, and the additional difference is taxed independently at a rate of 10%, N. Vettas stated that this proposal will not reduce the tax revenue of the state but will act as an incentive for business development. As he said, the direct effects from the implementation of the measure over a 10-year time horizon, with the most conservative scenario, would be an average business growth rate of 2%.

The proposal for the gradual abolition of advance tax is expected to strengthen the liquidity of businesses and create more “space” for new investments. In the event of a phasing out over 5 years, the measure is expected to provide tax relief for businesses amounting to 5.5 billion euros and if 50% of this money goes to investment projects, this means around 2.5 billion euros new investments.

This amount may not seem high, however, as N. Vettas pointed out, it is important because “the current level of investment in the country is very low”.

In terms of the institutional framework for depreciation, the practice in Europe is to have more flexibility and to have accelerated depreciation.

The EENE proposal foresees maintaining 10% for the first two years and then giving the possibility to collect the entire depreciation in the third and fourth year. “Knowing that this measure is in effect, businesses will upgrade their equipment today” estimated N. Vettas.

As N. Vettas explained, the effects, cumulatively, of the four EENE proposals, in a basic scenario, are estimated as follows:

  • 5% annual increase in business growth rate.
  • Boost productivity by 1%.
  • Increase in GDP by 1.6 billion euros per year in the first decade.
  • Creation of 17,000 new full-time jobs.
  • Increase tax revenue for the state by 1 billion euros per year in the first decade.