Within the European Union, a national tonnage tax regime brings in the issue of
maritime state aid as a matter of EU policy and which is essentially a kind of
concession given in recognition of the importance of European shipping and the
need for competitiveness in this field vis a vis non-European maritime states. Closely
related is the issue of tax avoidance, which, although technically a lawful device, is
closely watched by both the EU regulator as well as domestic regulatory taxation
authorities. Another issue concerns EU rules relating to foreign corporations controlled by entities based in a European Union country, especially where such a
corporation is located in an offshore jurisdiction where relatively liberal taxation
rules prevail.
1.2 Purpose
The purpose of this chapter is to examine the United Kingdom tonnage tax regime
and its compatibility with European Union taxation rules, Attention will be focused
on the importance of shipping to the economic growth of the United Kingdom, and
what steps are being taken in terms of national policy to prevent the decline of
shipping which evidently is harmful to international trade and commerce over
seventy percent of which is seaborne.
1 While numerous European countries have
embraced the tonnage tax system, this chapter focuses only on the law and practice
in the United Kingdom which operates pursuant to the Merchant Shipping (Tonnage
Tax) Regulations 2000 made under the Finance Act 2000.
2 The reason for examining the tonnage tax regime of the United Kingdom is that since the institution of this
system, the fleet size has increased considerably and the previous decline of the
recent past continues to be in a state of reversal.
The United Kingdom, among other traditional maritime states of the European
continent has chosen to emulate the practice adopted by many states outside of
Europe most of which are developing countries and have, in recent years, gradually
enhanced their shipping fleets. It will become apparent from the discussion in this
chapter that the tonnage tax phenomenon relates to a particular kind of ship registry
which needs to be clearly understood in order to comprehend the advantage of the
tonnage tax system. The principal line of inquiry in this chapter is to assess whether
in the United Kingdom, there is an infringement of the state aid rules of the European
Union. This will be determined primarily by examining the EU policy on state aid
for maritime transportation. Incidental to this determination, the issues of tax
avoidance and the application of the CFC Rules will be considered contextually.
1 Mukherjee and Brownrigg (2013), p. 1, 14.
2 c.7, Schedule 22, paragraphs 47, 85(3), 112(7), 113(4), and 130 to 136.
714
Y. Yin
maritime state aid as a matter of EU policy and which is essentially a kind of
concession given in recognition of the importance of European shipping and the
need for competitiveness in this field vis a vis non-European maritime states. Closely
related is the issue of tax avoidance, which, although technically a lawful device, is
closely watched by both the EU regulator as well as domestic regulatory taxation
authorities. Another issue concerns EU rules relating to foreign corporations controlled by entities based in a European Union country, especially where such a
corporation is located in an offshore jurisdiction where relatively liberal taxation
rules prevail.
1.2 Purpose
The purpose of this chapter is to examine the United Kingdom tonnage tax regime
and its compatibility with European Union taxation rules, Attention will be focused
on the importance of shipping to the economic growth of the United Kingdom, and
what steps are being taken in terms of national policy to prevent the decline of
shipping which evidently is harmful to international trade and commerce over
seventy percent of which is seaborne.
1 While numerous European countries have
embraced the tonnage tax system, this chapter focuses only on the law and practice
in the United Kingdom which operates pursuant to the Merchant Shipping (Tonnage
Tax) Regulations 2000 made under the Finance Act 2000.
2 The reason for examining the tonnage tax regime of the United Kingdom is that since the institution of this
system, the fleet size has increased considerably and the previous decline of the
recent past continues to be in a state of reversal.
The United Kingdom, among other traditional maritime states of the European
continent has chosen to emulate the practice adopted by many states outside of
Europe most of which are developing countries and have, in recent years, gradually
enhanced their shipping fleets. It will become apparent from the discussion in this
chapter that the tonnage tax phenomenon relates to a particular kind of ship registry
which needs to be clearly understood in order to comprehend the advantage of the
tonnage tax system. The principal line of inquiry in this chapter is to assess whether
in the United Kingdom, there is an infringement of the state aid rules of the European
Union. This will be determined primarily by examining the EU policy on state aid
for maritime transportation. Incidental to this determination, the issues of tax
avoidance and the application of the CFC Rules will be considered contextually.
1 Mukherjee and Brownrigg (2013), p. 1, 14.
2 c.7, Schedule 22, paragraphs 47, 85(3), 112(7), 113(4), and 130 to 136.
714
Y. Yin