Vestager ready to modernize tonnage tax

The tonnage tax is not just vital to European carriers, it also represents a crucial condition in ensuring that the European maritime industry has a sustainable size, explains the EU Commissioner for Competition, Margrethe Vestager, in an interview with ShippingWatch.
Photo: Line Ørnes Søndergaard
Photo: Line Ørnes Søndergaard

Without tonnage tax there would be no significant maritime industry in Europe.

Stripped to its essentials, this is the message delivered by the EU Commissioner for Competition, Margrethe Vestager, in her first interview about the framework conditions for the many carriers, suppliers and offshore businesses based in the 28 EU member states.

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The 47-year-old Commissioner, who serves in one of the key positions on the EU Commission, tells ShippingWatch that there are no plans to impair the possibilities of using the tonnage tax, which already constitutes a basic condition for many EU-based carriers. Rather, she is prepared to discuss ways in which to modernize and develop the tonnage tax.

Tools must be discussed

In a few weeks, Margrethe Vestager will have served one year as EU Commissioner for Competition, and at a time when numerous EU member states are making efforts to improve their framework conditions, including the countries' tonnage tax schemes. Denmark is one, Sweden another, and most recently the UK has announced its ambition "to pull out all stops" to keep ships sailing under the Union Jack. Finally, Norway, as a non-EU state, has presented a new maritime plan heralding even better tax conditions for the sector.

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"This is a very concrete discussion that we need to take, about whether to broaden the tonnage tax. Of course, this tax scheme cannot be applied to everything that floats or is thrown into the water. But at the same time, and I'm willing to take this discussion, we need to ensure that the tonnage tax stays modern, as the businesses operating at sea are also evolving. They are in no way at a standstill. So one needs to be open toward discussions on how to use the tools that we agree are legitimate. For instance tonnage tax," says Margrethe Vestager in an interview with ShippingWatch.

Tonnage tax here to stay

The EU Commission's, and specifically Margrethe Vestager's, stance on the question of whether the individual EU nations can introduce attractive tax conditions for the profession are crucial. When a country adjusts and improves its framework conditions for the maritime sector, the EU Commissioner for Competition is the one who will ultimately have to approve the scheme. And this will not happen unless the EU gets something in return, for instance in the form of a certain number of ships registered in an EU nation, and a certain share of European seafarers employed on the vessels.

Vestager's fundamental belief is that the tonnage tax represents the lifeblood of the European maritime industry, and as such, that removing the tonnage tax would be a completely wrong move.

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"The tonnage tax is here to stay. The form might be up for discussion, but the tonnage tax itself is a good thing and it forms a very clear basis for European shipping."

Doesn't that go against the principles of free competition?

"Yes, but the maritime industry is global with routes that connect the world. And as such, one needs to have a pragmatic approach here, so that there can be a degree of competition within a certain framework. There are many sectors in which participants compete within a framework. These could be in terms of health care or the environment," she explains.

Depends on the state budget

Many stakeholders in Denmark are currently working to expand the country's tonnage tax scheme to cover a broader range of vessels than is the case today, not least in order to secure jobs for offshore activities in the North Sea. Several political parties are positive toward the efforts, but in a recent interview with ShippingWatch, Minister for Business and Growth, Troels Lund Poulsen, stressed that this will ultimately depend on how the numbers in the coming state budget turn out.

The Danish Shipowners' Association estimates that around 600 new jobs could be created if the country's framework conditions are strengthened, and if offshore carriers manage to land jobs related to the heralded North Sea expansion efforts.

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