Financial Daily from THE HINDU group of publications
Tuesday, Feb 26, 2002
Industry & Economy
Logistics - Shipping
Government - Policy
Speech enthuses shipping industry
NEW DELHI, Feb. 25
The President, Mr K.R. Narayanan's speech to Parliament on Monday has given the domestic shipping industry cause for cheer.
During the course of his speech, which is often seen as a precursor of things to come, the President said: "The Government will soon announce new policy initiatives to encourage Indian-owned shipping companies to compete globally.''
A tense domestic shipping industry, which is eagerly awaiting the announcement of a new tonnage tax from the Finance Minister, Mr Yashwant Sinha, has greeted the President's speech with joy. "This is good news,'' said an official with one of the leading domestic shipping companies.
Though the President declined to elaborate on the specifics of the new policy initiatives being planned, Government sources said that it could be anything like a tonnage tax, seafarer's taxation or hike in depreciation.
The shipping industry has been clamouring for a new system of taxation based on the tonnage of shipping companies to replace the existing corporate tax structure.
"About 90 per cent of world shipping tonnage is at a very low level of tax. If Indian shipping companies are to compete with global shipping lines, they should be on par with the global counterparts as far as taxation is concerned,'' industry sources said. While the Finance Ministry has pointed to the " loose ends'' in the tonnage tax report submitted by a committee headed by Dr Rakesh Mohan, Advisor to the Finance Minister, the industry has come up with answers to solve the dilemma faced by North Block.
The Finance Ministry had come up with two main issues - firstly, the fact that the Income-Tax Act does not allow for a tax based on notional income and secondly, the relevance of linking the tonnage tax to the net registered tonnage (NRT) of shipping companies.
Mr B.L. Mehta, member of the tonnage tax committee, said: "Agreed that the IT Act does not allow for collection of tax based on notional income. But in countries where tonnage tax has been introduced, it is covered under a separate piece of legislation. For instance, in the UK, the tonnage tax is covered under the Finance Act 2000. The same has happened in other countries and India has to adopt the same system by enacting a separate law to deal with tonnage tax alone.''
Similarly, all the countries that have introduced tonnage tax have linked it to the NRT of shipping companies.
"Nowhere is tonnage tax linked to deadweight tonnage or gross registered tonnage,'' Mr Mehta said.
The Rakesh Mohan panel has recommended the adoption of notional profit method with applicable corporate tax rates to calculate the tonnage tax for shipping companies.
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