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Greece lacks the political will to fight fuel smuggling

04 October 2012 / 16:10:55  GRReporter
3791 reads

Victoria Mindova

Fighting illegal fuel trade requires strong political will, which has been lacking for years. Economists and retailers in the sector who see that the problem of fuel smuggling has been increasing in recent years express this common opinion. The market research commissioned by the federation of merchants and craftsmen and the Hellenic federation of traders and owners of petrol stations support the findings too. It was presented to journalists in Athens this week.

Although there are two refineries, dozens of warehouses and more than 6,500 petrol stations in Greece, the fuel market is still not competitive. The reason is that the country's legal framework does not allow free importation of fuel. The players at the top of the pyramid remain few, complete transparency in pricing has been lacking and no new competitors have been allowed.

"There is no competition because there is no free importation of petrol and diesel in the country. There might be two refineries producing fuel and a group of wholesalers distributing fuel, but they have not been selected on a free basis. In other words, we have few and specific market players," professor Dimitris Mardas told GRReporter. He conducted the market research with a team of students and he is the author of a report commissioned by the two federations. Law protects the oligopoly created, the economist says. He stresses that the legislation can be changed overnight in order to liberalize the fuel market and to create a competitive environment. However, such steps have not been yet taken.

Retailers are adamant that a key accomplice in spreading the smuggling is the very state with its inefficient controlling bodies. Customs, border crossing points and the tax administration cannot or do not want to end these practices.

Fuel smuggling flourishes in different ways. Mardas gave the example of a case revealed several years ago, in which a Bulgarian tanker had to fuel from a Greek refinery. The fuel was presented as an exported good and therefore, it was exempt from duty and other types of fees. Once the tank had fuelled from a warehouse held by the refining company, it set off to Bulgaria. However, it was unloaded in Larissa, where the supervisors were able to detect the offence before the fuel was distributed in the domestic black market.

Fictitious exportation of fuel that remains in the country and is distributed without the burden of excise duties and fees is a most common practice. Market analysts crosschecked the data on the export volume of petrol and diesel to Bulgaria, Albania, Macedonia and Turkey. They required the same countries to submit data on the importation of the same type of fuel from Greece. The results showed significant differences between the data on Greek exportation to Bulgaria and the data on Bulgarian importation from Greece.
 
An example given in the report shows that in 2001, the Greek fuel traders declared that they had exported to Bulgaria gasoline worth $ 27 million, whereas the Bulgarian authorities reported imports from Greece worth $ 18 million. The conclusion is that a significant part of the difference was due to fictitious exports through which Greek producers and traders evaded the taxation and excise duties on fuels. After 2007, when Bulgaria became a member of the European Union, the amounts declared for fuel exports from Greece and those for imports from its southern neighbour Bulgaria were almost equal.

Expert estimates, which a report of the International Monetary Fund on the topic confirmed, indicate that the country loses about one billion euro annually from illegal fuel trade. Greece maintains one of the highest prices per litre of petrol compared with other countries in Europe and 54.2% of the price goes for taxes and excise duties. High levels of taxes stimulate illegal trade, market players say. Mardas proposes the adoption of a series of measures to tighten the control of the weak links in the sector. It is not yet clear whether this will happen.

Tags: EconomyMarketsFuelSmugglingGreeceBulgaria
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