Along with the foregoing discussion on whether the tonnage tax system may be
considered as a tax avoidance scheme, the issue of the application of the CFC Rules
has been addressed under Sect. 5.2 of this chapter and conclusions to that effect have
been presented. It is submitted, that in real terms, tax avoidance can only take place if
the shipowner moves his ships from his home registry to a tax-friendly offshore
jurisdiction. As explained earlier, the home-grown UK tonnage tax regime is
designed to prevent ships from being moved to such foreign jurisdictions. It is
notable that whereas the open registries attract ship owners of all nationalities by
using the tonnage tax system, the traditional European ship registries exemplified by
the UK has introduced the same tonnage tax mechanism to keep ships owned by
national shipowners at home, thus preventing the flight of national tonnage to
foreign ship registries.
In light of the legislation in place governing tonnage tax schemes in the UK, it can
be concluded that subject to the comments made above relating to issues that are
questions of fact, the tonnage tax scheme as it prevails is not contrary to the EU
legislative provisions on state aid or tax avoidance.
7 Summary and Conclusion
In this chapter, an attempt has been made to research the subject of tonnage tax
which is an interdisciplinary topic combining taxation law and shipping law. Not
much has been written on this topic from a legal perspective which makes it a
domain of relatively uncharted waters. It is of contemporary interest embracing
global trade and commerce and is not free from controversies (Stokes 1992, pp.
78–90). The topic is therefore of prime importance to scholars and practitioners alike
who are involved in taxation and shipping law matters. In this inquiry, tonnage tax is
rightly portrayed as a phenomenon unique to the shipping industry and is presented
as the focal point for discussion and the inevitable theme of the chapter. It is
explained that the tonnage tax concept is at once a branch of taxation law and at
the same time in some respects an exception to the norms of taxation law. It is also
explained that the rationale for such exception is the law and policy directed towards
the rejuvenation of the shipping industry in the UK within the scope of the wider
extent of the problem in Europe as a whole.
The focus of the inquiry is the tonnage tax regime of the UK and in the final
analysis an assessment is made of its compatibility and consistency with the tax law
requirements of the EU which apply across the board. It is submitted that the tonnage
tax regime is the optimum solution for reversing the trend of UK and European
shipowners flagging their ships out to open registries. The UK has experienced
considerable success with the introduction of tonnage tax in the face of competition
offered by offshore tax-friendly jurisdictions. This has been elaborated in the chapter
in a methodical way after discussing the evolution of the tonnage tax concept and its
rationalization from the perspective of the so-called traditional maritime states.
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Y. Yin
considered as a tax avoidance scheme, the issue of the application of the CFC Rules
has been addressed under Sect. 5.2 of this chapter and conclusions to that effect have
been presented. It is submitted, that in real terms, tax avoidance can only take place if
the shipowner moves his ships from his home registry to a tax-friendly offshore
jurisdiction. As explained earlier, the home-grown UK tonnage tax regime is
designed to prevent ships from being moved to such foreign jurisdictions. It is
notable that whereas the open registries attract ship owners of all nationalities by
using the tonnage tax system, the traditional European ship registries exemplified by
the UK has introduced the same tonnage tax mechanism to keep ships owned by
national shipowners at home, thus preventing the flight of national tonnage to
foreign ship registries.
In light of the legislation in place governing tonnage tax schemes in the UK, it can
be concluded that subject to the comments made above relating to issues that are
questions of fact, the tonnage tax scheme as it prevails is not contrary to the EU
legislative provisions on state aid or tax avoidance.
7 Summary and Conclusion
In this chapter, an attempt has been made to research the subject of tonnage tax
which is an interdisciplinary topic combining taxation law and shipping law. Not
much has been written on this topic from a legal perspective which makes it a
domain of relatively uncharted waters. It is of contemporary interest embracing
global trade and commerce and is not free from controversies (Stokes 1992, pp.
78–90). The topic is therefore of prime importance to scholars and practitioners alike
who are involved in taxation and shipping law matters. In this inquiry, tonnage tax is
rightly portrayed as a phenomenon unique to the shipping industry and is presented
as the focal point for discussion and the inevitable theme of the chapter. It is
explained that the tonnage tax concept is at once a branch of taxation law and at
the same time in some respects an exception to the norms of taxation law. It is also
explained that the rationale for such exception is the law and policy directed towards
the rejuvenation of the shipping industry in the UK within the scope of the wider
extent of the problem in Europe as a whole.
The focus of the inquiry is the tonnage tax regime of the UK and in the final
analysis an assessment is made of its compatibility and consistency with the tax law
requirements of the EU which apply across the board. It is submitted that the tonnage
tax regime is the optimum solution for reversing the trend of UK and European
shipowners flagging their ships out to open registries. The UK has experienced
considerable success with the introduction of tonnage tax in the face of competition
offered by offshore tax-friendly jurisdictions. This has been elaborated in the chapter
in a methodical way after discussing the evolution of the tonnage tax concept and its
rationalization from the perspective of the so-called traditional maritime states.
736
Y. Yin