TALLINN – According to Tallink Grupp CEO Paavo Nogene, an amendment should be submitted to next year's draft state budget, which would provide for the financing of the passenger ship support measure implemented on the basis of the state aid permit applied for by the state also in 2022.
According to Nogene, the support is necessary in order to avoid additional redundancies in shipping companies that keep connections open, which are important for the operation and recovery of vital freight, trade and the tourism sector both during and after the crisis.
In a letter sent to the government, Riigikogu, the parliamentary finance committee and the parliamentary groups of parties, the Tallink CEO highlights the fact that in 2020 the Estonian government reached an understanding that it is necessary and useful to protect the competitiveness of the maritime sector.
Namely, the Estonian state applied to the European Commission for a state aid permit for the creation of a measure supporting the competitiveness and job preservation of the maritime sector similar to neighboring countries and other maritime countries, and the European Commission issued a state aid permit for a three-year period.
Thus, the state aid permit is valid until Dec. 31, 2023. The funds for the implementation of the measure in 2020 and 2021 were provided by the government and approved by the Riigikogu. As the measure was set up within the budget year, these funds were not processed under the state budget strategy.
At the same time, the explanatory memorandum to the 2020 supplementary budget act states that in order to mitigate the negative economic effects in the shipping sector, additional measures to reduce the tax burden related to the workforce must be implemented until Dec. 31, 2023.
"Passenger shipping companies engaged in international voyages are paid a quarterly support equal to the difference between the labor taxes calculated on the salary paid to a crew member and the labor taxes calculated from the tax base -- at 1.5 or 2.5 the minimum monthly wage, respectively. Tallink and Viking Line are currently eligible for the measure," it is said in the explanatory memorandum to the 2020 supplementary budget act passed by the Riigikogu.
However, Nogene is concerned, because information has reached Tallink Grupp that the draft State Budget Act submitted to the Riigikogu does not provide the Ministry of Economic Affairs and Communications with budget funds for 2022 to implement this measure for the period of time approved and agreed by parliament last year, which companies have taken into account in light of the legislator's will.
According to the Tallink CEO, as a result of the timely implementation of the measure, a larger wave of redundancies among people working under a seafarer's contract of employment was prevented in Estonia. "In today's viral situation, we are in a situation where the state does not have to impose additional restrictions, international organizations have issued official warnings regarding travel to Estonia, which means that the maritime sector is faced with an even longer recovery period than provided for in the explanatory memorandum to the supplementary budget of the state budget for 2020 as the need to implement the measure until the end of 2023," Nogene said.
According to him, the withdrawal of the government from the measure means additional redundancies on passenger ships operating under the Estonian flag and it reduces connectivity and the frequency of departures in international passenger traffic.
Nogene points out that the minister of economic affairs and infrastructure applied for state budget funds in the amount of 7.7 million euros for 2022 to continue the measure. Tallink Grupp sees the government reserve or transfers from the budget lines of state co-financing and/or earmarked allocations of the Ministry of Finance as possible last-minute sources of coverage in the Riigikogu proceedings.
The Tallink CEO pointed out that based on public information, several projects are time-delayed in comparison with known information at the time when the draft state budget was submitted to the Riigikogu. For example, the later completion of Rail Baltic became public later, and thus, according to Nogene, there may be less need for state co-financing for the project in the 2022 budget than before.