Tonnage tax provokes lively debate

The introduction of a tonnage tax regime in South Africa was high on the agenda at last week’s IDC shipping forum. Regarded by some as a means of reviving South Africa’s shipping industry and making it competitive with other major maritime countries, it has its benefits and drawbacks. Simply defined, tonnage tax is a special tax regime for shipping companies based on the number, size of ships operated by a company and the number of days the ship is operated in a year. “It is effectively a presumptive tax where a notional profit is calculated – and a standard tax rate is applied to this notional profit,” National Treasury’s Cecil Morden said. But since South Africa will be among a host of countries offering the tonnage tax regime, some of the delegates saw it as a “blunt instrument”, a concern addressed by one of the speakers who noted: “Tonnage tax may align South Africa’s tax environment with that of the world’s ship owning nations and could be an incentive towards South African ship ownership, but to attract foreign owners and operators from other established jurisdictions South Africa would have to create a superior environment.” Comment on the SA tonnage tax proposals closed last Friday.