Travel Company Mergers On Hold

Some six months ago the biggest news circulating within the local travel trade included the merger talks between Amphitrion and the Lambrakis group’s Travel Plan, and the purchase of Manos Travel System by the Vassilakis group (Hertz). Neither deal reached fruition, nor did any of the companies offer reasons as to why or even if talks continue. While insiders are very skeptical, perhaps recent tax legislation will put these deals back on the burner.

Last month, National Economy Minister Yiannos Papantoniou unveiled a series of tax breaks and measures that are designed to push local companies to begin a new wave of corporate consolidation in the next three years, with enlarged, stronger groups emerging that would be able to compete on a global level.

“The tax package underscores the state’s strategy of enhancing businesses’ competitiveness,” he said.

The biggest incentive for mergers is a 10-percent cut in the corporate tax rate for the first year and a 5-percent reduction in the following year for companies merging before December 31, 2004. The new rates will apply from this year.

Mindful of the job losses that normally come in the wake of a merger, the state plans to encourage integrated companies to take on additional employees by allowing them to deduct social contributions for the new staff from net profits over a two-year period, Mr. Papantoniou stressed.

Another measure, which allows companies to set up an investment fund with part of their profits for investments in the 2002-2005 period, is designed to help firms plough their earnings back into the business.

While calling the tax incentives a significant step, analysts said the measures were not sufficient in themselves. The downside, they say, is that the state has failed to address the issue of a company’s cost-cutting ability.