Maritime Subsidies Do They Provide Value for Money?

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The International Transport Forum The International Transport Forum is an intergovernmental organisation with 60 member countries. It acts as a think tank for transport policy and organises the Annual Summit of transport ministers. ITF is the only global body that covers all transport modes. The ITF is politically autonomous and administratively integrated with the OECD. The ITF works for transport policies that improve peoples’ lives. Our mission is to foster a deeper understanding of the role of transport in economic growth, environmental sustainability and social inclusion and to raise the public profile of transport policy. The ITF organises global dialogue for better transport. We act as a platform for discussion and prenegotiation of policy issues across all transport modes. We analyse trends, share knowledge and promote exchange among transport decision-makers and civil society. The ITF’s Annual Summit is the world’s largest gathering of transport ministers and the leading global platform for dialogue on transport policy. The Members of the Forum are: Albania, Armenia, Argentina, Australia, Austria, Azerbaijan, Belarus, Belgium, Bosnia and Herzegovina, Bulgaria, Canada, Chile, China (People’s Republic of), Croatia, Czech Republic, Denmark, Estonia, Finland, France, Georgia, Germany, Greece, Hungary, Iceland, India, Ireland, Israel, Italy, Japan, Kazakhstan, Korea, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Mexico, Republic of Moldova, Montenegro, Morocco, the Netherlands, New Zealand, North Macedonia, Norway, Poland, Portugal, Romania, Russian Federation, Serbia, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Tunisia, Turkey, Ukraine, the United Arab Emirates, the United Kingdom and the United States. International Transport Forum 2 rue André Pascal F-75775 Paris Cedex 16 This email address is being protected from spambots. You need JavaScript enabled to view it. www.itf-oecd.org Case-Specific Policy Analysis Reports The ITF’s Case-Specific Policy Analysis series presents topical studies on specific issues carried out by the ITF in agreement with local institutions. Any findings, interpretations and conclusions expressed herein are those of the authors and do not necessarily reflect the views of the International Transport Forum or the OECD. Neither the OECD, ITF nor the authors guarantee the accuracy of any data or other information contained in this publication and accept no responsibility whatsoever for any consequence of their use. This work is published under the responsibility of the Secretary-General of the ITF. This document, as well as any data and map included herein, are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. Cite this work as: ITF (2019), “Maritime Subsidies: Do They Provide Value for Money?”, International Transport Forum Policy Papers, No. 70, OECD Publishing, Paris. Acknowledgements This project was directed and written by Olaf Merk with co-authorship by Lucie Kirstein and Vatsalya Sohu at the International Transport Forum. The report was made possible through a voluntary contribution by the International Transport Workers Federation. Data collection for the report benefited from answers to a questionnaire sent to country representatives of both the International Transport Workers Federation and the International Transport Forum. Valuable comments on a draft version of the report were provided by Stephen Perkins, Rex DeightonSmith, Michael Kloth and Edwina Collins (all ITF/OECD), Jonas Teusch (OECD), officials from the International Transport Workers Federation, officials from DG Competition at the European Commission. The report also benefits from valuable contributions from Karin Gourdon (OECD), Bill Hemmings and Faig Abbasov (Transport and Environment). A draft version of the report was discussed in the Transport Research Committee of the International Transport Forum in April 2019. In addition, the report benefits from a panel discussion on “Maximising regional value through maritime connectivity investment“ at the 2019 Summit of the International Transport Forum, held 22-24 May 2019 in Leipzig. This panel, moderated by Pat Cox, consisted of Philippe Alfonso (European Transport Workers Federation), Martin Dorsman (ECSA), Christophe Tytgat (SeaEurope) and Katherine Bamford (Port of Vancouver). Valuable information and perspectives for the study were collected via interviews with: Sveinung Fjose (Menon Economics), Henryk Piatkowski (Polish Seafarers’ Union), Margarida Martins (European Maritime Safety Agency), Catarina Ramos (European Maritime Safety Agency), Jaime Veiga (European Maritime Safety Agency), Jacob Clasen (Danish Shipping), Marcel van den Broek (Nautilus International), Anders Hansson (Norwegian Maritime Officers Association), Kasper van der Gugten (Netherlands Ministry of Infrastructure and Water Management), Anne Legregeois (Lawyer), Francesca Baiocchi (Uiltrasporti), Jean-Philippe Chateil (FOMM UGICT CGT), David Dearsley (DM Consulting), Michael Thöne (FiFo Institute for Public Economics at the University of Cologne) and various experts that prefer to remain anonymous. The improvements to the report made as a result of consultations with all of these groups and individuals is gratefully acknowledged but the interpretations and conclusions drawn remain the responsibility of the authors.

TABLE OF CONTENTS 4 MARITIME SUBSIDIES: DO THEY PROVIDE VALUE FOR MONEY? © OECD/ITF 2019

Table of contents Executive summary .............................................................................................................................. 6

Typology of maritime subsidies ............................................................................................................ 9

Classification of maritime subsidies ................................................................................................. 9

Data availability and comparability ................................................................................................11

Direct subsidies ..............................................................................................................................11

Tax expenditures ...........................................................................................................................16

Transfer of financial risk to government ........................................................................................23

Maritime subsidy expenditure ........................................................................................................... 27

The monetary value of maritime subsidies ....................................................................................27

Most common maritime subsidies ................................................................................................28

Value for money?............................................................................................................................... 34

Recent impact studies ...................................................................................................................34

Flag and ownership ........................................................................................................................36

Seafarer employment ....................................................................................................................40

Maritime clusters and shore-based employment ..........................................................................43

Transport modal shift ....................................................................................................................45

Environment ..................................................................................................................................45

Subsidies and shipping policies .......................................................................................................... 47

Shipping policies ............................................................................................................................47

Promoting a level playing field? .....................................................................................................48

Limited conditionality of subsidies ................................................................................................56

Conclusions ........................................................................................................................................ 61

Notes ................................................................................................................................................. 62

References ......................................................................................................................................... 63

TABLE OF CONTENTS MARITIME SUBSIDIES:

DO THEY PROVIDE VALUE FOR MONEY? © OECD/ITF 2019 5 Figures

Figure 1. The tonnage tax base in the Netherlands...........................................................................30

Figure 2. The tonnage tax base in Finland.........................................................................................30

Figure 3. Tonnage tax to be paid per country for a similar ship ........................................................31

Figure 4. Fiscal exemptions for seafarers in 2016 in selected countries...........................................32

Figure 5. Share of total global fleet by flags for OECD countries plus Malta and Cyprus ..................37

Figure 6. European Union ship ownership rate.................................................................................38

Figure 7. Main ship-owning countries in OECD.................................................................................39

Figure 8. Masters and officers on European Union-flagged vessels by nationality ...........................41

Figure 9. Seafarer employment in France, Germany and the United Kingdom.................................42

Figure 10. Orderbook by ownership and building areas....................................................................44 Tables

Table 1. Classification of maritime subsidies.....................................................................................10

Table 2. Implementation of national tonnage tax regimes ...............................................................18

Table 3. Fiscal exemptions for seafarers in selected countries .........................................................20

Table 4. Accelerated depreciation for vessels in selected countries.................................................21

Table 5. Fiscal exemptions for ship fuel in domestic shipping selected countries ............................23

Table 6. Differences between budgeted and actual revenue foregone of Dutch tonnage tax.........28

Table 7. Fiscal exemptions for ship fuel in domestic shipping, 2016.................................................33

Table 8. Selection of impact studies of maritime subsidies...............................................................34

Table 9. Tonnage tax schemes that cover terminal operations.........................................................54