On Friday 7 September 2007 the Norwegian government informed that in the budget proposal for 2008 they will present a proposal for a new tonnage tax system for the shipping industry in Norway.

 

If this proposal is adopted, it will have substantial negative effect for GC Rieber Shipping.

 

On Friday 7 September 2007 the Norwegian government informed that in the budget proposal for 2008 they will present a proposal for a new tonnage tax system for the shipping industry in Norway.  The new system will be applicable as from 1 January 2007.

 

The Government states that the shipping companies in the future will be tax exempt in line with shipping regimes in EU countries. This will be positive for GC Rieber Shipping ASA However, in order to be allowed into the new system, the government proposes that the untaxed equity in shipowning companies under the current regime is made taxable over a ten year period.  This untaxed equity is not taxable under current rules. If this proposal is adopted, it will have substantial negative effect for GC Rieber Shipping. The company has  according to the current rules treated this tax as untaxed equity. Our intention has been to remain within the current system, which means that, unless rules were seriously broken, the tax would have remained untaxed equity in the balance sheet. 

 

The fact that the Government now proposes this tax to be paid, is by GC Rieber Shipping  looked upon as an obvious breach of promise and a severe punishment to a company that has been loyal to the system and developed a strong and sound shipping and offshore company based upon the competent and highly specialized maritime cluster in our region and within the framework presented by the authorities. Sad to say, it seems clear that once more the authorities have demonstrated a total lack of understanding for the need of stable long-term conditions within our industry.

 

A preliminary calculation made by the company shows that the effect of the new proposed rules, should they have been implemented as per 30 June 2007, would be an immediate increase in tax liabilities and a reduction of equity of about NOK 250 million. As a consequence, the equity ratio would have been reduced from 51 % to 44%. Further, should the proposal be passed as law, this will reduce our ability to invest in new technological advanced and environmental friendly tonnage in an amount of close to NOK 1 billion and our relative competitiveness will be severely hampered compared to competitors that are operating under international tax regimes.

 

We are sorry to realize that entering the current shipping tax system in 1996 on the trust that we would enjoy a stable and competitive business climate in Norway for our industry seems to have been a wrong decision.

 

For further information, please contact 

CEO Sven Rong, phone + 47 55 60 68 00.

CFO Hans Petter Klohs, phone + 47 55 60 68 00.