Marine Log - October 2007 - (Page 4) Nick Blenkey Senior Editorial Consultant Second Thoughts Norwegian tax headaches I don’t know what honors, medals, gongs and accolades the Republic of Cyprus is in the habit of bestowing upon those who have made particularly brilliant contributions to its economic development, particularly in the maritime sphere. Nonetheless, I would like to humbly suggest to the President of the Republic that he digs something suitable out and present it to Norwegian Finance Minister Kristin Halvorsen. Over the years, Ms. Halvorsen and her predecessors have done more than most to boost the Cypriot economy. For example, they have persuaded John Fredriksen (arguably the world’s canniest shipowner) to cease being NorA Seadrill semisubmersible way’s richest citizen. Instead, he now travels on a Cypriot passport. Fredriksen’s Heman Holding Limited, Limassol, Cyprus, is a large shareholder in such companies as Seadrill, Deep Sea Supply and Frontline Ltd., the world’s largest tanker operator by capacity. Just last month, Prosafe, the world’s leading owner and operator of semi- submersible service rigs and a major owner and operator of floating production and storage vessels, stopped being a Norwegian company and became a Cypriot corporation. Now Ms. Halvorsen has promulgated a policy that, if implemented, may turn the recent trickle of Norwegian shipowners heading for Cyprus into a mass exodus. [Britain’s Daily Telegraph thinks they’ll head for the U.K., but my bet is Cyprus.} Ms. Halvorsen is proposing a new tax regime for Norwegian shipping companies in the National Budget for 2008. The proposed tax regime will be similar to the tonnage tax regimes available for the industry in the European Union. Since 1996, the Norwegian industry has had a favorable tax regime with taxation of company profits only upon withdrawal of profits or exit from the scheme. The aim was to persuade shipowners to register more ships in Norway and the Finance Ministry argues that “with the growing number of tax exemption regimes within the EU, it is apparent that the present regime no longer is able to attract new investments in Norwegian shipping companies.” Be that as it may, a significant number of companies signed up for the present scheme in good faith. Now Ms. Halvorsent wants to claw back two-thirds of the taxes deferred under the present regime over a period of 10 years. The shipping companies will be allowed to use the remaining one-third of the tax obligations for environmental investments. The proposed change may have less to do with honing the competitiveness of Norwegian shipping than with bending to political ideology. “Norway’s left-center government coalition, led in this issue by Finance Minister Kristin Halvorsen of the Socialist Left (SV) party, has claimed that wealthy shipowners should pay more tax,” noted newspaper Aftenposten. “While the Labor and Center parties had sympathy for the shipowners and don’t want to jeopardize jobs in the shipping sector, SV wouldn’t accept tax relief for a business that’s dominated by many of Norway’s wealthiest capitalists.” Why should those of us outside of Norway be steamed about Ms. Halvorsen’s ghastly proposal? Here’s one good reason: maritime safety. Norwegian shipowners will be strapped for cash if the Halvorsen proposal goes through. The lesson of history is that when shipowners are in a cash crunch, they don’t renew tonnage as often, maintenance is deferred as much as possible and, in general, bad things happen. It has nothing to do with greedy shipowners putting profit ahead of safety. It has everything to do with not being able to afford to do the things one would wish to do. nblenkey@sbpub.com 4 MARINE LOG OCTOBER 2007 www.marinelog.com http://www.wortelboer.nl http://www.wortelboer.nl http://www.marinelog.com
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