Greek energy industry: Syriza plays favourites in excise tax vote

Electricity plant. Kozani, 2008. [Lisa Murray/Flickr]

Under the nose of the Troika, the Greek government passed an amendment exempting natural gas from an excise tax, favoring a single industrial sector.

In the middle of the discussions with the Troika (IMF, the European Commission, and the ECB) regarding the first assessment of Greece’s third bailout, and without the previous approval of the State General Accounting Office or the creditors, on 7 April, the Greek parliament voted in favor of an amendment introduced by Syriza lawmakers exempting specific industries from an excise tax, introducing a fiscal measure without proposing alternatives.

Legislators who proposed the amendment noted that such an opt-out would give a boost to domestic industries, whose exports are hampered due to the high excise tax on natural gas “comparing to competing industries in other neighboring EU member states applying lower excise rates”.

But the amendment boosts the competitiveness of one industry alone.

The amendment was included in an irrelevant bill entitled “Ratification of the Agreement on Air Services between the Greek Government and New Zealand” and was said to be aligned with the EU Directive 2003/96/EC restructuring the Community framework for the taxation of energy products and electricity. But the directive does not in fact exempt natural gas used as raw material.

The directive provides the minimum levels of taxation applicable to each energy product, depending on whether it is used as motor fuel or heating, as well as the exemptions or reductions in the minimum levels of taxation.

As long as these minimum rates are respected, member states are free to set the excise duty levels according to their national policy considerations.

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In addition, the directive does not permit the taxation of natural gas when used for the production of electricity.

In Greece, an extremely high excise tax was levied on natural gas in 2011 “ignoring” the minimum levels and exemptions issued by the directive putting extreme pressure on the already struggling Greek industry while favouring the electricity incumbent enjoying privileged and exclusive access to lignite and hydro-electricity which are exempt from excise tax.

The aforementioned amendment had already been proposed last June, but did not go through, after serious concerns expressed by the industry and the opposition, who stressed the need to address the issue of excise taxation on gas to the industry as a whole, rather than granting a selective benefit to one industrial corporation alone.

Troika’s role

The Greek private sector has heavily criticized the Troika for its focus on fiscal discipline instead of growth-driving policies.

Greece’s international creditors are currently in Athens, and are holding discussions with the government on the terms of the country’s third bailout first assessment.

The government is struggling to find equivalent measures to fill the fiscal gap in order to rapidly conclude the bailout’s evaluation and start the discussion over a debt relief.

The review of energy taxation is among the bailout’s prerequisites, and the Greek government has repeatedly declared that a reduction of Greece’s industry energy cost would be a priority.

But according to reports, the government is in fact mulling an increase on taxation on natural gas, which would deal a heavy blow to Greek industry’s international competitiveness.

Greek industry reacts

According to Eurostat, Greece is among the three EU countries with the highest gas prices for industrial use due to heavy taxation.

High natural gas prices are attributed to an excise tax, which is partly in breach of a relevant EU directive defining taxable energy products and the uses for which they are taxed.

The Hellenic Federation of Enterprises (SEV), which represents employer and business organizations, sent a letter to the Tsipras government expressing its opposition to an increase in excise taxes on natural gas.

“Natural gas and in general the cost the Greek industry is burdened with is disproportional compared to its competitors in other EU countries,” Theodoros Fessas, the chairman of SEV,  recently said in an interview with EURACTIV Greece.

The Hellenic Federation has repeatedly demonstrated the need to reduce the excise tax on energy products for industrial use, particularly of natural gas used for electricity generation, as a crucial factor for the survival of domestic industry.

In its letter, Greek industry noted that Greece had the highest level of excise duty on natural gas for industrial use than any other member state.

“It is twice the EU average and ten times higher than the provisions of the relevant EU directive. It is characteristic, as oil and gas prices have dropped dramatically, the above flat excise tax increases import prices by more than 40%.”

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