One of the innocent bystanders in all this has been the Greek shipping community. As part of the broad agreement between Athens and the Eurozone, the Greek government has undertaken to increase the tonnage tax, a flat tax that is assessed each year on all ships that are managed by shipping companies based in Greece.
As expected the shipping community has been up in arms crying foul over the proposed tax and threatening to leave to more tax-friendly locales like Monaco, Dubai, or Singapore. This has made me wonder: what would be the effect of increased tonnage tax on a shipping company’s running costs?
Tonnage tax is the only tax levied by the Greek government, since shipping companies based in Greece are not subject to income taxes on their profits. I have calculated the tonnage taxes per ownership day for three of the largest dry cargo shipping companies based in Athens: Diana Shipping Inc. (DSX), Safe Bulkers Inc. (SB), and Star Bulk Carriers Corp. (SBLK). Tonnage taxes are a component of vessel operating expenses.
Tonnage taxes remain a rather small component of vessel operating expenses, ranging between $113-$153 per day for year 2014 for the three dry-cargo companies in my sample.
Let’s assume for argument’s sake that the Greek government unilaterally doubles the tonnage tax in accordance with the agreement provision. Is this amount really the straw that will break the camel’s back and force a mass exodus of Greek shipping companies to greener pastures? I don’t think so.
But let’s further assume that Greek shipping companies do decide to move to Monaco, Dubai, Singapore, or even London or New York. Have shipping executives done a cost of living comparison between say Monaco or New York City and Athens? The argument that shipping companies will migrate to substantially higher cost locations to avoid tonnage taxes seems ludicrous.
I believe the lobbying on behalf of Greek ship-owners is not about tonnage taxes, but about keeping their income tax-free status. Greek ship-owners are some of the hardest-nosed traders you can find. I don’t believe a tempest in a teapot will cloud their business acumen. I suspect that they will cut a deal with the taxman sooner or later, and if I may add for the benefit of both sides.
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