Firms halt cross-border energy trade as Greece mulls ‘ridiculous’ import tax

Cross-border energy trade between Greece and states with a lower tax is set to take a hit with the country on the verge of slapping a prohibitive charge on imports. Already two companies have halted cross-border trade from affected markets, ICIS understands.

In an internal document seen by ICIS, the Greek government has adjusting the wording of its tax code. The new wording means any import of goods from a country with preferential tax rates will be subject to a 26% tax.

Under the definition of goods, both electricity and gas fall within the description.

Sources from two major foreign energy companies said directions from the upper management have called for a halt in transactions on the Greek border for the time being until more information comes to light.

“My boss said he doesn’t want to see any invoices with any of these countries,” said one trader.

Greece usually imports electricity from countries including Bulgaria, Macedonia and Albania, all of which have lower taxes. This means that electricity flows into Greece now face difficulties.

The move is part of a government drive to counter tax evasion.

The document indicates that counterparties conducting a trade should submit justification of the transaction to the tax authority. Once this is recognised as a “standard business transaction”, the prepayment will be refunded within three months of the transaction.

Four individual sources told ICIS the tax was on the government’s agenda this week.

A senior market source with knowledge of the matter said the amendment had been approved by the ministry of Finance last Friday.

In fact legal information from the government’s ministerial gazette indicates the most recent update took place earlier this week, on Monday.

Government spokespeople were unavailable for comment on Thursday afternoon.

Questions

The government is expected to issue a bill accompanying the tax code reform which will clarify details of how the new regulations will be implemented.

The market source said the move will be implemented as soon as it is published, which would imply the adjustments have already come into force. But a final government bill would be required to validate it.

The situation raises several questions, in regards to which authority will check the transactions are accurate and what qualifies as a “standard transaction”.

“Which transactions are ‘standard’ and which are ‘suspicious’ is the million dollar question,” said one senior trader.

It also remains unclear when the tax needs to be paid and what guarantees will be in place to ensure the money is returned. The country remains mired in financial difficulties. “The question is, who trusts the Greek state when it comes to money being refunded,” said a third market source.

The news quickly sparked concern across the markets, with participants emphasising the bill would act as a barrier to cross-border trade with one regional participant labelling the move “ridiculous”.

Bulgarian traders joined in the chorus of disapproval.

The draft bill has been amended at least once since it was first put together, one source said.

Such a tax goes against the spirit of EU regulations governing the free movement of goods. Hope remains in the market that this will discourage the government from enforcing the rule.

“It is clearly against EU regulations, so the government will lose this case for sure,” said one. Sophie Udubasceanu