There is little doubt that Tonnage Tax, as implemented by those governments which have accorded such a regime to their shipping industries, has been beneficial. At best it has been a commitment by government that the taxation regime will not fluctuate wildly over a reasonable period, enabling ship owners to plan in a more logical fashion, rather than be faced with all sorts of reactive strategies to a changing fiscal environment.

It is difficult to over-emphasise this feature of stability in an industry where capital commitments are long term and the surrounding climate is one of permanently cyclical demand for ships. There are plenty of examples where the opposite has been the case, where governments have enacted regressive and even retrospective taxation demands upon their shipping industry. There is no mystery why, in such cases, the shipping industry has failed to flourish and may well have “exported” itself to a more benign regime, where the value of shipping is appreciated.

Some of the options open to those countries which have Tonnage Tax regimes in place have been doubly beneficial. In some, the link to training as a condition of joining a scheme has been enormously useful in replenishing maritime workforces that might otherwise have run dangerously low. Unsurprisingly, these schemes have been generally welcomed by shipping companies that have moved to take advantage of them.

So the news that the European Commission has begun a review of EU State Aid Guidelines to Maritime Transport might bring with it a hint of uncertainty, although the review itself is to be expected as the 2004 guidelines have always been due for review within seven years of their date of application.

The issue of stability and its importance has been emphasised in a comment on the review by the international accountant and shipping adviser Moore Stephens, which points out that in the current economic difficulties stable fiscal climate in European tonnage tax regimes are particularly important. The competitive nature of the various bases available for shipping must surely be taken into account, with attractive tax breaks being offered to the sector in places like Singapore, which is steadfastly reinforcing its maritime infrastructure.

While the Commission has not taken any view on what changes might be necessary and all stakeholders are being asked for information via a detailed and comprehensive questionnaire, Moore Stephens suggests that it is important that all respond to this inquiry and become involved in the consultation. The adviser also suggests that the opportunity might be taken to simplify schemes like that operated in the United Kingdom, which have been thought over-complex.

BIMCO, while recognising that different fiscal arrangements may suit different governments, would strongly endorse the emphasis on stability, which is fundamental in a capital-intensive and global industry essential to the wellbeing of world trade. Knowing with a reasonable degree of clarity what the taxation regime is likely to be when shipping investments are being contemplated removes a major obstacle.

Author: - The Watchkeeper - Source: BIMCO