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European forwarders call for fairer intermodal taxation regime

FIATA and CLECAT argue that rules allowing shipping lines to pay lower taxes for hinterland services risk market distortions, as container lines increasingly compete with freight forwarders on those services

European freight forwarders have called on governments to ensure a “level playing field” in the maritime supply chain by ensuring that shipping companies’ logistics businesses are taxed in line with others operating in the same market.

The European Association for Forwarding, Transport, Logistics and Customs Services (CLECAT) and the International Federation of Freight Forwarders Associations (FIATA) said they welcomed the proposals by the Organisation for Economic Co-operation and Development and the G20 nations for a global minimum tax rate.

But they warned that with shipping exempted form the Inclusive Framework on Base Erosion Profit Shifting two-pillar plan, a door had been left open for shipping companies to benefit.

“CLECAT and FIATA raise concerns that the broad definition of shipping services, which currently includes ancillary services, would open the door to tax avoidance and trade distortion, undermining the overarching intent of the OECD/G20 BEPS framework,” the organisations said in a statement.

They called on OECD member countries to include cargo handling, logistics and ancillary activities within the scope of the proposals in the interests of ensuring a level playing field.

“The final details of the agreement still need to be further defined, and should ensure that the definition of ‘shipping services’ eligible for the exemption focuses on vessel-related port-to-port services only, so as not to perpetuate tax evasion,” the statement said.

“CLECAT and FIATA underline that the exemption should in no way apply to other ancillary or door-to-door services in the maritime supply chain, as it would create further distortions, and would enable tax evasion schemes.”

The organisations are concerned by the “overly broad” definition of shipping that could lead to an exemption of shipping companies’ services in the areas of freight forwarding, customs, and logistics services.

“This would mean that freight forwarders, logistics service providers and terminal operators would be required to pay taxes for the same activities that shipping lines could offer tax-exempt or partially tax-exempt, thereby providing incentives for carrier haulage (door-to-door transport arranged by the carrier) rather than merchant haulage,” they said.

“This would further distort competition in the maritime logistics supply chain and would weaken the very purpose of the new OECD proposals.”

The statement warned that this would have a detrimental impact on small- and medium-sized companies, who were already suffering from the ongoing disruptions in the maritime supply chain and the “dominant position of the shipping companies”.

“FIATA and CLECAT call on OECD member countries to include all services which are not directly related to the ship within the scope of BEPS Pillar 2, including hinterland transport, storage, cargo handling, customs services, fiscal and insurance services, and all other ancillary services,” the statement said.

“Carve-outs and exemptions for ancillary activities will undermine the policy intent of the OECD/G20. Such tax exemptions will encourage further consolidation in the sector and reduce choice and service in the logistics supply chain, to the detriment of SMEs and consumers.”

Source: Lloyds Loading List

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