Quantifying tax subsidies to shipping
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Quantifying tax subsidies to shipping Olaf M. Merk1 Accepted: 26 October 2020 © Springer Nature Limited 2020
1 Introduction The shipping industry has a long history of state support via maritime subsidies. These subsidies consist of monetary aid of state bodies to shipping companies, in various forms. Subsidies can be granted for a particular service and under specific conditions, or without strings attached. Often, the boundary between conditional and unconditional subsidies is difficult to draw, e.g. subsidies for postal services by ship in the late nineteenth century were often so generous that they could be considered mostly general aid rather than a subsidy provided for a specific service (Meeker 1905). Tax subsidies form part of a larger group of maritime subsidies: the subsidy consists of the tax revenues foregone (for the state) due to a tax deduction or exemption for shipping companies. So, rather than a direct transfer of funds from the state to the company, a tax subsidy is essentially aid in the form of a lower tax burden for shipping companies, compared with non-shipping companies. Tax subsidies for the shipping industry have emerged over the last few decades. While maritime subsidies have become almost universally applied in maritime nations since the 1870s, most of these were subsidies via state expenditures. An example is the Operating Differential Subsidy (ODS) in the USA (Jantscher 1975). Rarely was there state support in the form of tax subsidies (Jones 1916; Saugstad 1932). More recently, however, tax subsidies have become the main vehicle to support the shipping sector. This is mainly related to the emergence of open registries [flags of convenience (FOCs)], offering favourable tax treatment to shipping companies, often practically zero tax rates. Shipowners have massively used this as a possibility for tax avoidance by registering their ships under these flags. This provoked the established maritime nations to offer similarly generous tax exemptions to shipping companies in order to make it attractive to shipowners to re-flag their vessels under the flags of the countries where they are genuinely linked. One of the main tax exemptions for shipping—and the subject of this editorial—is an exemption from corporate income tax that shipping companies can acquire if they opt for a * Olaf M. Merk olaf.merk@itf‑oecd.org 1
International Transport Forum (ITF), Organisation for Economic Co-operation and Development (OECD), 2, rue André Pascal, 75016 Paris, France Vol.:(0123456789)
O. M. Merk
tonnage tax scheme. This is a shipping-specific tax scheme that is very favourable to the shipping sector. In 1990, only Greece had a tonnage tax; now, 22 other European countries have the same. The emergence of tax subsidies in shipping has arrived together with an increase in literature on the taxation of shipping. The first group of studies consisted of descriptions and analyses of taxation regimes in general and in individual countries (Gardner and Richardson 1973; Marlow and Mitroussi 2012; Maisto (ed.)
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