Maritime trade union Nautilus has urged the UK government to clamp down on the operation of so-called Red Ensign Group (REG) ship registries from the same locations.
In letters to foreign secretary Boris Johnson and shipping minister John Hayes, the union informed that the evidence of tax avoidance in UK overseas territories, revealed in the ‘Paradise Papers’, showed widespread use of UK territories and dependencies such as Bermuda, Gibraltar, the Cayman Islands and the British Virgin Islands to create mechanisms for companies and individuals to avoid tax liabilities.
“The papers contain extensive references to members of the Red Ensign Group (REG) which offer shipowners considerable incentives as well as the opportunity to use low-cost labour. Essentially, we believe they also serve as another form of tax haven subsidised by the British taxpayer,” Mark Dickinson, General secretary of Nautilus International, said, adding that the UK’s relationship with the REG is inherently damaging for its domestic maritime policy objectives.
The 2016 Shipping Fleet Statistics showed that the UK Ship Register (UKSR) now accounts for just 26% of the total REG deadweight tonnage, and the most recent UNCTAD Maritime Report showed that more than 80% of UK deadweight tonnage is registered with foreign flags.
Additionally, Dickinson said that there is evidence that some of the REG registers fail to discharge their IMO/ILO convention responsibilities to the same level as the UKSR, and some are classed as Flags of Convenience (FoC) by the International Transport Workers’ Federation (ITF).
“FoC registries, including those in the REG, make it more difficult for unions, industry stakeholders and the public to hold shipowners to account,” he said, adding that the publication of the Paradise Papers raises further questions about their long-term political sustainability.
“The OECD in particular has been working towards increasing transparency and exchange of information among countries, and these moves will inevitably increase the pressure on the FoC system. Nautilus supports the ITF position 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),” according to Dickinson.
The General secretary called for ministers to make the findings of the Department for Transport’s study of the commercialisation of UKSR publicly available and ensure there is open debate on its recommendations.
“There is, according to UNCTAD, 41 million dwt of tonnage beneficially owned in the UK but registered in these exotic locations. It’s time to bring those ships to the UKSR. Otherwise the suspicion will persist, as the Panama and now the Paradise Papers show, that the shipping industry is an integral part of a global and dirty business of tax and regulatory avoidance,” Dickinson concluded.