Norway's fleet set to fly UK flag in tax row

News was prepared under the information support of Online Daily Newspaper on Hellenic and international Shipping "Hellenic Shipping News".

28 Sep 2007

An article in Daily Telegraph states that Norway's biggest shipowners are considering reflagging their vessels under Britain's Red Ensign after a furious row over backdated tax.The Norwegian government has proposed an overhaul of its shipping tax regime that threatens to land one of the world's largest commercial shipping fleets with a retrospective tax bill of at least NKr21bn (ВЈ1.9bn). Since 1996, operators of Norwegian registered ships have been allowed to defer tax liabilities as long as they reinvest in their businesses and in local shipbuilding. Norway has now proposed bringing its system into line with most other European countries, including the UK, with the introduction of a "tonnage tax", where shipowners pay a tax on tonnage capacity rather than operating profits.In a huge shock to the industry, however, Norway has proposed that before the introduction of the new regime it claws back taxes that have been deferred for the entire past decade.The planned backdated tax has caused apoplexy among Norway's shipowners, including operators of huge tanker fleets. They are threatening to register their ships elsewhere, such as the UK, potentially jeopardising 45,000 maritime jobs in Norway.According to Daily Telegraph Andreas Sohmen-Pao, vice-chairman of the tanker operator BW Gas, said: "We've had the HSBC tax team looking at it and there has never been a precedent for something like this."He said BW Gas faced a backdated tax liability of ВЈ425m despite doing "nothing wrong" and believed the bill for the entire industry could be much higher than NKr21bn because the Government "hasn't been clear about the way in which it is calculated".The Norwegian Shipowners' Association, which met Norway's prime minister, Jens Stoltenberg, last Friday, argues the proposal will drastically raise the sector's cost of capital and even force owners to sell ships to pay the backdated tax. It reckons future investment could be reduced by NKr100bn – equivalent to 250 new vessels.Shipowner Wilh Wilhelmsen said the proposal "will have substantial negative effect" on its business. Mr Sohmen-Pao said: "If they go ahead with this, trust is shot to pieces. It's such an own goal. Norway has very few industries where we are a global leader. There's only fishing, shipping and oil and gas."Norway is expected to detail its plans in its October 5 budget statement.