Russian government wants to give the Russian flag back to the Russian fleet
18.11.2003 13:46

This week Vice Prime Minister Vladimir Yakovlev once again promised the ship owners to make Russian flag convenient. In particular he said that the “many suffer” draft law on “Russian Maritime Register” will considered by the State Duma in the next year. The draft law provides tax privileges for the ships registered in the new register. This will contribute to bringing the newly built ships under the Russian flag. Now up to 90% of such ships are registered abroad. According to the evaluations of the MoT the new register will increase the number of the newbuildings at the Russian shipyards 4-5 folds without attracting any budget means. According to Mr. Yakovlev now the draft law is being coordinated with different Ministries, which cannot find common ground so far. The main opponents of the new law are the Ministries of Taxes and Finance, which fear shrinking the tax base and giving the wrong incentive for the lobbyists of other industries. The work on the draft law started as far back as in 1998, but each time the process was reversed at the stage of coordinating at the Ministries. De facto there is a struggle between the MoT and the two above Ministries. Victor Yuriev, one of the authors of the draft law says the fears are groundless. The new law would apply only to the new ships, therefore it cannot shrink the existing tax base and there is no precedent for other industries, as there are no such big difference between own and foreign flag in other industries.

The main idea of the draft law is to create additional register for the ships under the Russian flag operated overseas. According to the developers of the new legislation they followed international experience in this field. There are two restrictions for the ships to be registered in the second register: 1) the ship has the right only for the international shipments (the shipments between two national ports are prohibited) and 2) only newly built ships may enter the second register (it is impossible to transfer a ships from the first into the second register).

Now the ships operated under Russian flags pay over 15 kinds of taxes. The new legislation suggests to exempt the ship owners form any taxes except “per tonnage”. At the moment the MoT has agreed with the Ministry of Taxes that the ships of the second register will be exempted from the property tax. MoT thinks that introducing the second register will solve the main shipbuilding problems: short and expensive local credits and long and cheap foreign ones. They claim that with the second register foreign banks will not require registering the new ships under foreign flags.

The ship owners will have far better chip repair opportunities, as they will be able to repair at Russian ports without any restrictions. According to the MoT evaluations approving the second register will give $9m of additional profit in the first year and in $26.5m in five years. According to Victor Yuriev the developers of the draft law “are sick and tired to prove obvious things”. The State Duma has approved the draft law, 18 Ministries have to pass their own approvals.

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