Friday, July 05, 2024

 

Abolition of French Tonnage Tax Could Lead to Reflagging

French flag
File image courtesy Marine Nationale

PUBLISHED JUL 4, 2024 9:38 PM BY ROMAIN FARNOUX

 

 

The potential abolition of the French tonnage tax regime, a favorable tax framework for shipping companies, is causing significant concern within the industry as early legislative elections reignited a debate started with the Finance Bill for 2024. The French tonnage tax regime also supports thousands of jobs and encourages shipowners to register under the French flag, bolstering national maritime influence and economic activity.

The French Court of Auditors estimates a potential 9.4 billion euro loss in tax revenues for 2022-2023 due to the tonnage tax regime, sparking debate on whether abolishing it would indeed boost public revenues.

Many believe that eliminating the tonnage tax could drive shipowners to relocate to other European jurisdictions with similar tax benefits, potentially reducing France's competitive edge in the global shipping industry.

It is reasonable to believe that shipowners currently under French tonnage tax regime would consider changing flag to another European flag, avoiding French corporate taxation whilst still retaining the benefit of their French tax leases. Other jurisdictions, sometimes referred to as ‘flags of convenience’, have even lower to non-existent taxation of earnings.

While the tax advantages of abolishing the French tonnage tax may seem attractive, the economic implications are far-reaching, and the strategic disadvantages of abolishing the tonnage tax call for restraint. The regime not only supports the maritime industry, it also aligns with France’s strategic interests as a leading maritime nation.

Romain Farnoux is a lawyer in Reed Smith’s Transportation Industry Group.

The opinions expressed herein are the author's and not necessarily those of The Maritime Executive.

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