Norway high court says shippers to avoid back-tax

Saturday, 13 February 2010

Norway's supreme court ruled in favour of shipping companies that have disputed $3.8 billion in back-taxes on profits retained over many years, spurring a rally for some Norwegian shipping stocks. Six out of 11 judges on the supreme court found the retroactive tax unconstitutional, the court's verdict said.Norway's government met shipping companies in court on Friday to defend its tonnage tax that had imposed a big tax bill on the industry at a time when the global downturn is hurting profits.

A scheme presented in 2007 aims to make Norway's system similar to tonnage tax systems in countries of the European Union, of which Norway is not a member.It also imposed 21 billion crowns ($3.8 billion) in back taxes on undistributed profits retained by shippers over many years. The retroactive tax affected some 55 shippers, including some listed firms.Shares in oilfield supply shipper Farstad Shipping, one of the plaintiffs, rose 8.3 percent after the verdict, while parcel tanker group Odfjell rose 7.8 percent and car carrier Wilh. Wilhelmsen rose 5.8 percent at 1001 GMT.

"This confirms that retroactive taxation is not legal," Farstad said in a statement. "The verdict provides the basis for predictable conditions for shipping activities based in Norway."The shipping industry had clashed with the Labour-led government, calling the new tax a betrayal of a 1996 deal meant to keep them competitive under the Norwegian flag, and many say Norway's reputation as a maritime nation has taken a hit.

Source: Reuters