Estonia, Legislation, Transport

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Cargo ships stop using Estonia as flag state

BC, Tallinn, 30.04.2014.Print version
There are no big cargo ships sailing under the Estonian flag anymore after Eesti Merelaevandus (Estonian Shipping Co)-owned mixed cargo-container ship Kurkse was deleted from the ship registry in February 2014 and its sister ship Kalana on April 16, LETA/Postimees writes.

"There are no real cargo ships sailing under the Estonian flag anymore," state Waterways Board department head Tarmo Ots.


International shipping group Tschudi-owned Eesti Merelaevandus sold both ships to a shipping company partly owned by Estonians who will most likely register them under the flag of Saint Vincent. "We sold the ships since the bank did not agree to refinance a loan," the company's board member Jaan Kalmus explained. "Our remaining ships sail under the flag of the Isle of Man since Estonian tax politics would render us uncompetitive as compared to other shippers."


While all Baltic Sea states grant social and income tax concessions to wages of seamen of their shipping companies, Estonian shipping companies pay full payroll taxes which increases the payroll cost by a fifth on account of income tax and by social tax another third. While the social tax is later refunded, it happens only a year later. Shipping companies also say that Estonia's aliens' policy makes it hard for shipping companies to hire temporary workforce from abroad when they need to.


Seafaring experts say that one seaman working under national flag creates three on-shore jobs in the home country which is sufficient to compensate the revenue the state is deprived of due to tax concessions.


Estonian finance ministry isn’t interested in granting special conditions to seafaring. "In international competition, one doesn’t have to go along with paying extra, instead spheres have to be chosen the success of which serves the society, including with tax income and just rules of the game," said finance minister Jürgen Ligi. "Flag of convenience is an international business. Entrepreneurs, for whom the colour of the flag and the social guarantees of their employees in Estonia are not important, cannot be classified according to nationality. When Estonians are employed in shipping, the state has already paid for their higher wages in the form of education. It is not just to pay to the employees of this sphere also pensions and health insurance at the expense of lower-income people working in Estonia."

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