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France's Far Right Has Tonnage Tax in its Sights

Jordan Bardella and Marine Le Pen of the National Rally (RN) are leading in France's polls. Bardella has proposed doing away with France's tonnage tax (file image courtesy RN)
Jordan Bardella and Marine Le Pen of the National Rally (RN) are leading in France's polls. Bardella has proposed doing away with France's tonnage tax (file image courtesy RN)

Published Jun 27, 2024 7:02 PM by The Maritime Executive

 

France's tonnage tax system is under threat again, and this time, its detractors are poised to gain power. The nation's ascendant far right has been eyeing the favorable tax treatment that shipowners get in France (and in most EU nations), and it wants to abolish the tonnage tax in favor of a standard corporate tax on shipowners' profits. 

The tonnage tax system is designed to make national shipping industries more competitive by allowing shipowners to retain their profits. In a tonnage tax regime, the owner's sole tax obligation is based on the tonnage of their fleet; it is a flat tax, whether or not their firm performs well or loses money. It is designed to give owners an incentive to stay in the country, and typically yields a more favorable tax treatment than the general-purpose corporate tax system. France's Court of Auditors estimates that the tax's cost to the French state is approximately $4-6 billion per year in forgone revenue, based on corporate profitability during the high-water mark for container shipping in 2022-23. 

Last fall, during the debate of the nation's 2024 spending bill, members of France's political opposition proposed to torpedo the tonnage tax and replace it with the standard corporate tax of 25 percent on shipowners' profits. The proposal did not ultimately enter law, but France's far-right National Rally (RN) party has revived the idea in its campaign for the next round of parliamentary elections - and it is leading in the polls. The party's most popular figure, MP Jordan Bardella, has taken aim at the outsize profits of container shipping giant CMA CGM, which made billions during the late-pandemic rate surge. 

"There is a tax break for shipping firms that costs the state 5 billion euros and I want to end this tax break," he told Le Parisien in a recent interview. 

France's shipowners have warned that canceling the tonnage tax would have an outsized negative impact on French shipping, and could prompt many owners to reflag out of the country. 

"Eliminating the tax regime granted to shipping companies, as promised by the extremes, including in particular the National Rally (RN), poses a threat to our businesses, to our jobs and to our ports!" cautioned Jean-Marc Roue, head of Brittany Ferries. "The [shipowners] like the sailors do not want a special tax regime. They just want the same system as that available to their competitors [in the EU]. A government that takes it away from them sacrifices sailors and its economic sovereignty in the very short term!"