Tax contributions from liner billionaires surveyed – Splash247 – Splash 247 | Vette Leader

The issue of liner shipping and taxation is back in the news during a record season for global airlines in the second quarter.

This month, Maersk has reported a profit of $8.6 billion and Hapag-Lloyd a profit of €8.7 billion ($8.94 billion), amid a string of spectacular results that some politicians are questioning, whether airlines should contribute more to government coffers.

Sea-Intelligence’s latest weekly report suggests airlines will face “enhanced political headwinds” in the coming months as strong profits continue to pour in that make tech giants envious.

According to Sea-Intelligence, Maersk will pay $164 million in taxes in the second quarter, which translates to a tax rate of 1.8%. Hapag-Lloyd, which now rivals Volkswagen as Germany’s most profitable company, will pay €20.8m, an effective tax rate of 0.5%.

The gap between profits and taxes in the current climate is just too big to justify politically

“The problem for the airlines right now is that the discrepancy between their current profits and their low tax rates is becoming quite extreme,” Sea-Intelligence said of existing tonnage tax regimes, continuing: “Add that the airlines are seen politically as part.” driving inflation – though not to the extent some might believe. Add to this the very real emotional impact that providers are benefiting from highly unreliable services like never before amid an ongoing supply chain crisis.”

Politicians have frequently attacked the profits of the liners lately – and US President Joe Biden even went so far as to say so he would like to stop by the global airlines early this summer.

“The discrepancy between profits and taxes in the current climate is just too big to justify politically,” Sea-Intelligence explained, adding the caveat that any change in tonnage tax will have its own implications and politicians may not like what you receive.

Billionaire Rodolphe Saade came out fighting last monthdetermined to stop Parisian politicians from hitting his company with a windfall tax to help households fight rising inflation.

A growing number of French politicians are calling for a hefty 25% windfall tax for some local transport and energy companies, including Saadé’s CMA CGM container line and TotalEnergies.

Speaking to the French Senate on July 20, Saadé said: “We’re putting money on the table, and it’s not just charity. We help consumers. What I want is that we stop looking at CMA CGM and start looking at my competitors.”

Liner shipping is on course Surpass last year’s record profits by up to 73%according to new forecasts from Blue Alpha Capital, led by John McCown, citing the rising contract rates airlines have secured in 2022 and ongoing port congestion issues.

Net income this year is expected to reach $256 billion based on the 11 airlines monitored by Blue Alpha Capital, a number Bloomberg has pointed out, roughly equivalent to the gross domestic product of Portugal.

Olaf Merk, shipping expert at the OECD-affiliated think tank International Transport Forum (ITF), discussed tax today and said he found little reason why shipping companies should pay less tax than other sectors.

“The argument for the tonnage tax is that it offers predictability, which could be helpful when profits from shipping are very volatile. But that doesn’t mean that tax revenues from shipping should be that much lower,” Merk said syringes.

Merk argued that it is conceptually possible for countries to agree on an effective minimum tax rate for shipping companies, similar to the recent global agreement on a global corporate minimum tax rate. Tonnage tax systems could also have an effective minimum tax rate, Merk suggested.

Lars Jensen, CEO of container shipping consultancy Vespucci Maritime, commented on the sensitive issue syringes: “How much taxpayers should pay is a political question and as such cannot be answered objectively.”

Carriers compete in a global market where the playing field is unequal, Jensen pointed out. A variety of government subsidies tend to distort the market. In addition to the tonnage tax, there are also direct government subsidies, cabotage regulations, different flag state requirements and access to cheap credit.

“It may seem tempting to increase or eliminate the tonnage tax, but doing so also carries the risk of shippers shifting significant parts of their business to other jurisdictions. Or if they don’t, they could be significantly weakened against competitors who do,” Jensen warned.

It is also worth remembering that an analysis conducted by McKinsey before the pandemic revealed that the liner shipping industry as a whole lost around $100 billion over a 20-year period.

Jensen argued today that line profits will slip back towards normality, so it’s likely the market will have gravitated closer to normal before potential tax code changes are passed by a parliament and any politician looking to benefit from a massive cash injection dreams, it will be “rather disappointed”.

How long this increased freight rate environment lasts will then become important in the entire tax discussion.

With developments in the China Containerized Freight Index (CCFI) and insights from the largest rate declines in history, Sea-Intelligence has forecast that a rate reversal back to pre-pandemic levels in 2023 is unlikely.

“Clear rates have clearly started to decline, but historically the contract rate market is less volatile and therefore dampening the effect,” suggested Sea-Intelligence, going on to forecast that the market would not return to pre-pandemic levels by 2024, and even then, this “new normal” could be a market where rate levels are consistently higher than before the pandemic, a view shared by Parash Jain, global head of shipping and ports research at HSBC.

“Looking forward, we argue that after years of consolidation and mega-shipping alliances, shipping lines have learned capacity discipline, and while freight rates may still be volatile, freight rates that have reached decade-lows may not be in the future.” persist,” Jain said syringes last week.

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