“We know that our companies have to become more competitive.”
(Photo: Reuters)
Athens The Greek government wants to encourage small and medium-sized companies to cooperate and merge with tax rebates. These firms will pay a third less tax on their profits for the next three years. This is provided for in a draft law that is now before the parliament in Athens for discussion.
The regulation is expected to come into force on January 1, 2022. Prime Minister Kyriakos Mitsotakis said: “We know that our companies have to become more competitive.” With the planned incentives, the government wants to “promote mergers to strengthen companies,” said the Prime Minister.
Small business sizes are a chronic problem in the Greek economy. Data from the state statistics office Elstat from the end of September show: 95 percent of all Greek companies employ fewer than ten people. On average in the EU, the share of these micro-enterprises is only around 30 percent. Of the almost 719,000 companies in Greece, only 550 have more than 250 employees. These “large companies” – by Greek standards – generate 32 percent of total sales. This shows the relationship between company size and productivity.
Growing on your own is very difficult for most small and medium-sized businesses. They are often undercapitalized and have liquidity problems. Access to bank loans usually fails due to poor creditworthiness or the fact that these companies are not in a position to work out the business plans required by the credit institutions.
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“We want to help these small and medium-sized companies so that they can grow,” explains Alex Patelis, chief economic advisor to Prime Minister Mitsotakis, the Handelsblatt. The companies should be “enabled to increase their productivity, to be more innovative and to invest more,” says Patelis.
Prerequisite: fewer than 250 employees
The government wants to achieve this goal by promoting mergers and acquisitions, but also with platforms for the formation of business clusters, for example in procurement, marketing and sales. Companies that take over or merge with other companies pay only 15.5 percent on their profits for the next three years instead of the usual 22 percent tax, a discount of 30 percent.
Mergers of companies that each employ fewer than 250 people and do not generate more than 50 million euros in annual sales are funded. There is also a lower limit: the combined annual turnover of the merging companies must be at least 450,000 euros.
In addition, the tax break is only available if the merger’s turnover is at least 50 percent above the result of the largest partner. This is to prevent larger companies from buying up small businesses in order to force them out of the market. The aim is to encourage mergers of companies of similar size.
Audits during the application process are intended to ensure that only those mergers are funded that actually lead to more added value and higher competitiveness and are compatible with the EU’s goals for climate protection and digitization, according to the Greek Ministry of Finance.
Greece has to act, otherwise there will be no EU funds
The funding concept for company mergers is one of 15 requirements that Greece has to implement in order to approve funds from the EU Development Plan (RRF). With the fund, the EU wants to cushion the economic consequences of the corona pandemic and make the member states crisis-proof.
Investments in digitization and climate neutrality are given priority.
The government in Athens expects grants of 17.8 billion euros and low-interest loans of 12.7 billion euros from the fund over the next few years. The government intends to use part of these loans to encourage investments by merged companies. The loans from the EU development plan can account for up to 40 percent of the investment amount.
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