Though the Maritime Administration has been working on such a plan for more than four years, Prime Minister Jüri Ratas’ announcement that this would be one of the new government’s priorities came as a surprise to many despite Estonia’s pioneering experience with e-government solutions.

Combination of low tax and ease of access main incentive

As with other large ship registers elsewhere in the world, one of the main incentives for shippers to register their vessels in Estonia would be low to zero tax. Eero Naaber, chief of development at the Maritime Administration, who heads a work group established to increase the competitiveness of Estonian shipping, said to BNS on Thursday that tax was only one aspect of what they were working on.

“For the sake of the competitiveness of shipping it would apparently be best to completely exempt sailors from taxes. Yet since the social protection of sailors is also important, a compromise has to be found,” he said.

Naaber added that with their system, social tax would most likely be raised on the salaries of sailors, either as a percentage rate or as an otherwise defined sum.

“But we will cut social tax. We will cut income tax, and when it comes to unemployment insurance contributions, negotiations are under way,” Naaber said, adding that no decisions had been made yet.

What mattered to the shipowner was the total tax expenditure, not how high each individual tax was, Naaber said.

“If we look at the big ship registers, Malta, Cyprus, the Marshall Islands, it’s all very clearly down to zero there,” Naaber said. It would be essential to find a balance where competitiveness would not suffer, but social guarantees would be preserved.

However, taxes were not the only thing they could do to make shippers register their vessels here, Naaber said. How easy it would be to register a ship was another important aspect. “This doesn’t mean that it should be too simple, it just has to be simple enough to correspond to established global practices while assuring sufficient legal certainty,” Naaber said.

Legislative matters like this are being dealt with by a committee for the revision of maritime law that first gathered in September and is expected to finish its work in December 2019.

Supervision of ships and residence permits for sailors

The supervision of vessels also entered into it, which had to be effective enough on one hand to make sure that ships are seaworthy and on the white list, and very quick on the other, Naaber said.

“For this we have to set up state-of-the-art information systems at the Maritime Administration that would enable us to do this work on a high quality level, and fast. We’re working on it and making progress,” he said.

Residence permits for sailors are also an important aspect of remaining competitive. “Does a Filipino sailor somewhere between Africa and America need an Estonian residence permit to work on a ship sailing under the Estonian flag? I say he doesn’t. He is not a security risk for the Estonian state that would make it necessary to vet his background before he can start working on a vessel sailing under the Estonian flag,” Naaber said, adding that legislation to this effect could be interpreted in different ways, and needed to be reviewed for the sake of legal clarity.

No jobs in onshore services without ships

According to Naaber, the aim of the plan is not just to get ships to sail under the Estonian flag, but in a broader sense to promote Estonia’s reputation in shipping. “If we want more of the onshore sector here that deals with ships, the administration of ships, and offering services to them, and in order to lure more investment and business here, we need to have something to show,” Naaber said.

For that, they needed a number of ships registered here. “To just go out and say please come here, it’s all right here, that won’t work. What we need are ships,” Naaber said. Companies serving ships would in the future create jobs for highly skilled specialists, the current Estonian sailors among them.

At present, Estonian sailors are forced to work in their profession until they retire, as there are no onshore jobs related to shipping in this country. The alternatives for them are either to retrain, or to relocate to a country where onshore shipping jobs are available. “In the future, they would have the possibility to work in onshore companies in Estonia, there would be jobs and tax income,” Naaber said. “This is the ultimate goal, and the main place where money should start coming in.”

In the shorter term, the government would earn money in the form of registration fees. “The [fees] would be on the global level, and it would be possible to earn money like this as well,” Naaber said.

E-residency program included in the plan

The Maritime Administration has previously set Oct. 1, 2018 as the deadline by which ships should be able to register in the Estonian bareboat chartered register. The government wanted this to happen earlier still, Naaber said, adding that the Maritime Administration wanted to make the possibility available earlier as well.

The service would be targeted at a global audience, not Estonian companies alone. Naaber explained that in shipping, even if a company aims to offer their services in the Baltic Sea area or on nearby markets, they would be affected by global currents and trends all the same. “We have to think globally from the start,” Naaber said.

The requirement that the company that owns a ship must be registered in Estonia will apparently be maintained. This could be solved using the e-residency program that makes it easier to establish a company, while preserving the possibility of control. While this would undermine the competitiveness of the Estonian register to a certain degree, the broader picture as well as national interests had to be taken into account as well, Naaber added.