Ship-Owners Win $3.8 Billion Tax Battle

Norwegian ship-owners Feb. 12 won a legal victory against the government's bid to raise $3.8 billion in back taxes.

Norway’s Supreme Court ruled the retroactive tax was unconstitutional, spurring a rally in shipping shares, including Wilh.Wilhemlsen, Golden Ocean, Golar and Odfjell, on the Oslo stock exchange.

The dispute dates back to 2007 when the Socialist-led government introduced a scheme to align Norway's tax regime with the tonnage tax system in many European Union countries under which ship-owners pay tax on the size of their fleet, not their profits.

At the same time, the government imposed $3.8 billion in back taxes on undistributed profits retained by shipping companies over eleven years of a previous tax regime.

The retroactive tax affected over fifty ship-owners, including several listed companies.

The Norwegian Ship-owners' Association alleged the new tax system was a betrayal of a tax break deal in 1996 aimed at maintaining the competitiveness of the Norwegian fleet.

Several shipping companies threatened to move their headquarters abroad to avoid the taxes.

A lower court found in favor of two ship-owners -- Farstad Shipping and BW Gas -- in the summer of 2009, ruling the retroactive tax was unconstitutional.

Norway, which is not a member of the European Union, has one of the world's biggest fleets, comprised mainly of tankers and dry bulk carriers, break bulk ships, car carriers and specialized parcel tankers.

Contact Bruce Barnard at brucebarnard47@hotmail.com.