Tonnage Tax

Preference for the national fleet for Government cargoes and for cargoes controlled by the major industrial concerns in the country (Flag discrimination). Particularly during the 1980/90s an active policing of the 40/40/20 Unctad Rule in the liner trades although this is almost irrelevant today. Exclusive employment of national flags in certain protected trades (such as coasting – ‘cabotage’). Advantageous taxation schemes so that profits gained from shipowning activities bear little or no tax. If a Shipowner/Shipmanager does operate in a country which: Actively encourages Shipowning by its nationals; Has a domestic wage range which enables crews to be employed at competitive salary levels; Has a pool of experienced seamen; it will be attractive to Register ships under that flag.  A good example of such a country is India. Greece encourages its highly entrepreneurial shipowners by permitting them to Register the Shipowning companies abroad (usually Panama or Liberia) whilst the ships themselves are Registered in Greece – thus combining the best of both worlds. Failing any active encouragement from its Government the “traditional” Shipowner has no alternative but to Register his ship abroad.  The choice of Register will be influenced by: Cost – Registration fee and annual tonnage tax. Acceptability – not every flag is welcomed in every country. In this the Shipowner has two choices.  He can either use an “off-shore” Register or a “flag of convenience”/ “free flag”. “Off-shore” Registers are Registers established with favourable taxation regimes and flexible employment regulations but with close links with a particular established maritime country from which they draw the majority of their tonnage.  They also demand some commercial presence from the Shipowner in the territory. “Flags of convenience” Registers have already been described.  They have no connection with established Maritime Nations and most of them only demand the most cursory presence from Shipowners on their territory.  They have no connection with any one particular country; drawing their custom from anywhere and everywhere.  As noted, the most famous examples of these “flags of convenience” are Liberia and Panama, both with a large number of ships entered in their Register.  There are now a considerable number of other states which offer similar facilities with varying degrees of success.