In May 2001, the Finnish government decided, after lengthy uncertainty, to grant new subsidies for passenger shipping, in the form of cuts in taxation and social security contributions on seafarers' wages. The initial reaction of trade unions and ship-owners was disappointment, because such tax and social security contributions have not been fully abolished. Ship-owners still envisage possible "outflagging" of ships to other countries' registers in order to cut labour costs.
Download article in original language : FI0106188NFI.DOC
In May 2001, the Finnish government decided, after lengthy uncertainty, to grant new subsidies for passenger shipping, in the form of cuts in taxation and social security contributions on seafarers' wages. The initial reaction of trade unions and ship-owners was disappointment, because such tax and social security contributions have not been fully abolished. Ship-owners still envisage possible "outflagging" of ships to other countries' registers in order to cut labour costs.
After deliberations lasting throughout the spring, the government decided in May 2001 that it will grant new subsidies for Finnish merchant shipping (FI0105187F). The decision means that owners of passenger ships will be subsidised to the tune of FIM 240 million by decreasing their taxes and social security contributions from the beginning of 2002. The precise details of how the decision will be implemented are still unclear.
Both ship-owners and trade unions representing seafarers were disappointed at the decision, because they had hoped that Finland would move over fully to a "net pay system", with total abolition of employment-related tax and social security contributions. This system of state subsidy for maritime transport has been introduced in many other EU countries – most recently Sweden.
The ship-owners had earlier threatened to "outflag" their ships (transfer them to the register of some other country) if the net pay system was not implemented. In the face of this threat, the government had to weigh up the costs of subsidy against those which would be incurred if the seafarers concerned became unemployed. It has thus determined the amount of its subsidy within the framework of how much the threatened outflagging would have cost. The government faced a difficult situation, because its overall aim is to cut subsidies. It calculated that the move to a full net pay system would have cost about FIM 420 million. The government had already, in June 2000, introduced shipping subsidies in the form of "tonnage taxation" (levying a fixed tax, based on net tonnage, on shipping companies, rather than normal company taxes) (FI0007154N).
According to the Finnish Seafarers' Union (Suomen Merimies Unioni, SM-U), the government's new measures are a step in the right direction. However, the union doubts whether the subsidies are sufficient compared with the full net pay system, which will be introduced in Sweden on 1 October 2001. Many ship-owners still considered it entirely possible that their ships will be outflagged - possibly to Sweden, where state subsidy is higher than in Finland.
Il-Eurofound jirrakkomanda li din il-pubblikazzjoni tiġi kkwotata kif ġej.
Eurofound (2001), Government grants new wage subsidies for shipping, article.
