High-level talks for a global corporate-tax pact could disrupt the maritime industry just as it faces unprecedented upheaval in its effort to decarbonise, law firm Watson Farley & Williams (WFW) said in a note to clients.
According to press reports, finance ministers from the world’s seven biggest economies (G7) are expected to give initial approval to plans to introduce a minimum global corporate tax rate — possibly of about 15% — when they meet in London on 4 and 5 June.
G7 leaders may sign off on the proposals at a meeting in the UK county of Cornwall between 11 and 13 June. After that, debate is likely to shift to the OECD — a club of mostly wealthy nations.
The proposal, which would squeeze tax havens throughout the world, stands a good chance of materialising because it is backed by the new government in the US.
Shipping has sought, but has not yet been granted, an exemption from any such measure, WFW partner Richard Stephens said in an article released on Wednesday.
“If applied to shipping, the plans would cut through close to a hundred years of tax policy,” Stephens added.
That applies particularly to the tonnage tax system that spread in recent decades throughout the world, including OECD member countries.
“Given the world needs shipping, and needs it to invest heavily in improving its environmental impact, now seems an unfortunate time to throw complex tax rules into the mix,” Stephens said.
The industry, however, faces an uphill struggle to convince governments it deserves an exemption.
Policymakers will be reluctant to grant such exemptions to individual countries or businesses for fear of being accused of offering one group special treatment over others.
“There may be a queue of other industries asking for similar treatment if one is singled out for special treatment,” Stephens said.
Arguments that the new rules would be too complex to work for shipping will likely cut no ice with policymakers either, for the simple reason that they will be complex for everyone, the WFW partner added.
“The shipping industry may well find itself swept along with these plans for the perceived sake of the greater good of the integrity, simplicity and sense of fairness of this massive global tax reform,” Stephens said.
However, not everything is bleak for shipping. Since the main thrust of the reforms is aimed at global conglomerates, many shipping companies may slip through the net.
According to current draft documents, the minimum effective tax rate may apply just to groups with annual gross revenues exceeding $750m.
However, even at such a threshold, Stephens said: “There will clearly be a large number of shipping groups caught.”
