Ministry wants to fast-track tax breaks for ships sailing under Estonian flag

  • 2006-02-22
  • Staff and wire reports
TALLINN - The Ministry of Economy and Communications has reportedly expressed its intention to implement tax breaks to shipping companies whose vessels operate in international waters under the Estonian flag. The ministry's plan, which would help shipowners save on employees' social and income taxes, would affect shipping companies operating on the international market, such as Tallink.

The idea comes after neighboring countries have introduced tax benefits for their shipping companies, persuading several Estonian shipowners to re-register their vessels in another country.

Tallink's passenger ships and a few dozen other ships remain domiciled in Estonia, compared to a fleet that numbered over a hundred in 1991. It is for their sake that the tax breaks would be implemented, ministry officials said.

The Tallink Group announced in January that, out of economic considerations, it was considering transferring ships to the Latvian register. Rein Merisalu, chairman of the Estonian Shipping Association, was quoted as saying that registering ferries in Latvia would enable Tallink to save 20-30 percent on crew expenses.

Tallink's personnel expenses were 609.9 million kroons (39 million euros) in 2004, of which 147.5 million kroons consisted of social taxes. The group employs some 2,710 people, including 1,957 crew members.

Minister Edgar Savisaar, who met with representatives of the Tallink shipper on Feb. 15, admitted that the planned tax breaks were aimed not so much at making shipping companies' life easier as at trying to get them to keep their vessels registered in Estonia.

"The Latvians' success in persuading owners to register their ships there by using concessions should serve as an example to us," Savisaar said. "We're discussing subsidies in the context of Estonian cargo ships rather than Tallink."

The minister's adviser, Heido Vitsur, said there had been plans for providing subsidies to the merchant and fishing fleet as early as this summer, but the necessary sums had not been included in the state budget.

The actual scheme of subsidization is not yet in place, but Vitsur said a system would likely be introduced under which the social and income taxes would be payable on wages equaling two or three minimum wages and the rest of the pay would be tax-exempt.

Last year Finland's Viking Line announced it was mulling over putting all its ships under the Estonian flag in order to keep costs at the same level as Tallink, its main competitor.