Corporate Tax

Delivery shouldn’t be topic to minimal corporate tax – Lloyds Checklist

SHIPPING has been removed from the Organization for Economic Cooperation and Development’s proposals for a minimum global corporate tax rate of no less than 15 percent, Lloyds List reported on Monday.

The exception – which would apply to all companies from the largest to the smallest – is welcomed by the industry, which feared that at least the top-selling companies could fall within the scope of the rules, the report said.

Tax experts told Lloyd’s List that the statement released on July 1 was just an outline of the company’s intentions and the actual rules have yet to be worked out. However, the chances that shipping will catch up now seem slim.

Inclusion in the system would have ended decades of de facto soft treatment of owners in many jurisdictions and completely undermined the business model of lower open registers, which compete largely on the basis of effective zero taxes, Lloyds stressed.

“To the dismay of tax justice activists, many flags – both national and open registers – levy a tonnage tax based on assumed daily earnings per gross tonne rather than actual income and expenditure,” the report said.

This makes it possible to calculate taxes with reasonable accuracy over the life of a ship, which is essential in a cyclical industry.

Defense lawyers point out that there are no tax breaks on ships, fuel, office and staff costs, and no tax deductions are made on interest for financing shipping companies.

In addition, the tax remains in place in years when shipping companies are making losses. In the round, any advantage over companies that pay standard corporate tax is less than it looks, the report continues.

Industry officials strongly oppose a minimum tax rate on shipping.

Last year the World Shipping Council, the International Chamber of Shipping, the shipowners’ associations of the European Community and the Cruise Lines International Association presented their concerns in a joint submission to the OECD.

The four trade associations cited the long-standing consensus that shipping profits should only be taxed in the country of residence and that tax systems should be assessed in the light of national policies in support of national shipping.

An ICS spokesman said: “We welcome the recognition of the unique status of the shipping industry in this conversation.”

Olaf Merk, OECD expert on shipping taxation and public advocate of higher shipping pay, told Lloyds List that there were obvious anomalies in the agreement.

“The decision to exclude shipping revenue begs the question of what exactly ‘shipping’ is,” he said. “If it’s essentially all a shipping company does, the exclusion of shipping from a global minimum tax could lead terminal operators and shippers to wonder why they are paying taxes on the same activities that are tax-free or partially tax-free for shipping companies. ”

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