Govt mulls tax cut for shipping

The country's transport authorities are studying the possibility of lowering the tax burden for shipping companies after major players in the industry reported massive losses last year, officials at the Ministry of Transport (MOT) said Monday.

"We are working with several government bodies including the National Development and Reform Commission and the Ministry of Finance to study policies to support the shipping industry, including tax cuts," an official surnamed Xie at China Waterborne Transportation Institute (CWTI) under the MOT, told the Global Times Monday.

She declined to provide a timetable for when the research would be completed.

The Economic Information, a daily paper run by the Xinhua News Agency, also reported Monday that the MOT is studying the possibility of tax cuts and financing support for Chinese shipping companies. A related research report will be submitted to the State Council by the end of June, said the paper, citing Jia Dashan, deputy head of the CWTI.

"The country's shipping industry is in a difficult position. We should bring the tax on shipping companies in line with international practices by cutting the income tax for shipping companies and the crew and asset disposal tax," Jia was quoted as saying.

The country's shipping industry was badly hit last year with nine major listed shipping companies posting a total loss of 11.7 billion yuan ($1.9 billion), as well as a drop in net profit of 188 percent from a year earlier.

China COSCO Holdings, the country's top shipping conglomerate, posted a net loss of 10.5 billion yuan for 2011, the highest since the company was listed seven years ago.

Losses for Chinese shipping companies are expected to continue this year. The average reading of the Baltic Dry Index, a measure of the cost of shipping dry-bulk commodities, stood at 800 points in the first quarter, far below the break-even point of 1,700.

"The slower-than-expected recovery of the world economy and the oversupply of ships during the peak years of 2003-08, which outpaced the growth in shipbuilding orders, are contributing to the losses," Ye Meng, vice secretary-general of China Shipowner's Association, told the Global Times.

The global shipping market is set to remain challenging this year as bunker fuel prices are expected to rise further due to political uncertainty surrounding Iran, and the supply glut will persist.

The worldwide shipping fleet will grow by 12 percent in 2012, more than double the expected growth of commodity demand, according to a recent report by Deutsche Bank.

"In addition to tax cuts, we are hoping the government could allot special funds to support those shipping enterprises that promote technical innovation and develop green energy vessels to help them get past the difficult time," Ye said.