Feasibility and Investment Effectiveness of the Tonnage Tax
Asian Tax Journal Vol. 25 No. 3 (2024), pp. 95-123
Abstract
Since the tonnage tax applied to the current overseas shipping companies was introduced in 2005, this regulation has been extended five times, and the sunset deadline is the end of this year. The results of the feasibility analysis of the tonnage tax in this study are as follows. First, governments around the world have actively intervened in various ways to improve their shipping competitiveness. In particular, considering the strengthening of international regulations on the shipping industry, the need to support the shipping industry by improving international competitiveness, and the domestic economic ripple effect of the shipping industry, the government’s basis for intervention is sufficient. Second, it is not a special taxation method such as income deduction, tax reduction, and tax credit that is currently generally applied. However, the support method is appropriate in the internationally accepted tonnage tax. Third, in terms of policy targets, companies subject to tonnage tax in major countries are not limited to external shipping vessels, and there is no limit to annual operating tonnage, but only Korean tonnage tax system imposes such restrictions. Fourth, because the basic tax base of the tonnage tax is tonnage and number of operating days, not profit, it has a negative impact on vertical equity. The results of analyzing the investment effectiveness of this study using the difference in difference(DID) method are as follows. First, the tonnage tax system was shown to be effective in stimulating investment by shipping companies. Second, as a result of analyzing whether the reduced tax burden of companies subject to the ton tax system is used as a source of investment, the tangible assets of future are increasing. This means that the tax burden savings are being used as a source of funds for asset investment. Fourth, as a result of analyzing the relationship between the reduction in tax burden through the tonnage tax and ship investment, the introduction of the tonnage tax in the future, including the next, revitalize ship investment. The results of this study analyzed the feasibility and investment effectiveness of the tonnage tax applied to the current shipping industry and can be used as a basis for future policy.
Keywords
- Shipping industry
- tonnage tax
- ship investment
- investment effectiveness
- vertical equity
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