BW Gas and Farstad Shipping, two of the world’s major shipping companies, have commenced their court cases against the Norwegian Government’s demand for $2.3bn back-tax which is hammering the industry and damaging its flag reputation.
Imposed in 2007, the tonnage tax scheme has imposed an additional $2.3bn in back taxes on undisputed profits retained by shipping companies over numerous years, and Norwegian companies are seeking to reverse the back tax in full, claiming its illegality because no laws should have retroactive effect.
Jan Haakon Pettersen, Chief Executive of BW Gas, revealed that the “main argument is that we have been charged back tax overnight from the last 11 years,” designating the scheme as being in violation of the constitution.
“This has hurt Norway’s reputation, there is no doubt about that. For shipping, I would say it has been particularly damaging,” Mr Pettersen added. The glaring evidence of this has seen major shipping companies such as Frontline move to more beneficial tax systems, in this case, to Bermuda.
Wilh. Wilhelmsen has since responded to the system by moving its central shipping activities to Malta, and BW Gas aims to follow suit as it works towards moving its business out of Norway to avoid the imposed tax – certainly not a positive factor for Norway as it wades through the depths of a recession.
Deputy Finance Minister, Geir Axelsen, disagreed, however: “We see tendencies that ship owners are coming home because they view the tonnage tax system as attractive after the changes we made in 2007.” The case is expected to go through to the Supreme Court, and possibly further to the EU court system, given the strength of the dispute.