ITF: Panama a Tax Haven as FOC Flag Country

Revelations of tax avoidance and related activities, mentioned in the leaked Panama Papers this week, could lead to a change in the current climate of tacit approval for this kind of “socially damaging behaviour”, the International Transport Workers’ Federation (ITF) said.

An example of such tax evasions is flag of convenience (FOC) shipping, which states that a vessel owned in one country can be flagged in another, and according to ITF General Secretary, Stephen Cotton, “as an FOC flag – the largest in the world – Panama is essentially a tax haven like many of the UK territories that have been mentioned in these papers.”

“And who pays the price? Seafarers, who are subject to poor conditions and lower wages because they’re at the mercy of a system that allows for minimal regulation and the acquisition of cheap labour,” he said.

Cotton also said that ITF believed that there should be a ‘genuine link’ between the real owner of a vessel and the flag the vessel flies, in accordance with the United Nations Convention on the Law of the Sea (UNCLOS).

“FOC registries make it more difficult for unions, industry stakeholders and the public to hold ship owners to account. In many cases, the registries themselves are not even run from the country of the flag,” Cotton said.

“Some FOC shipping registers are franchised out to foreign companies and are also corporate registers. The Liberian Registry, the second largest in the world, is administered by the Liberian International Ship and Corporate Registry (LISCR), a wholly US owned and operated company,” Cotton added.

“The ITF’s campaign, compelling owners of FOC flagged vessels to sign agreements which guarantee certain terms and working conditions for crew and policing these through a network of inspectors, is the only thing that goes some way to redress the balance of the FOC tax avoidance scheme, and to recognise the human cost it has.”

Now that these incidents are being taken up more widely in a public arena, they can be properly investigated according to ITF President, Paddy Crumlin. He further added that ITF expects “to see action taken against those who have disregarded their responsibilities in the name of profit.”

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