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47 Intertax 832 (2019)
Taxing Carbon Emissions from International Shipping

handle is hein.kluwer/intrtax0047 and id is 861 raw text is: Taxing Carbon Emissions from International Shipping Tatiana Falcao According to the International Maritime Organization (IMO), maritime transport emits around I billion tonnes of C02 annually and was responsible for approximatly 2.5% of global greenhouse gas emissions in 2014. The prediction is that greenhouse gas emissions from maritime transport alone may increase between 50 and 250% by 2050, depending on future economic and energy developments. In spite of that, there is no concerted action or plan to tax or capture the C02 emissions derived from international maritime shipping - the most widespread and popular form of transportation. This occurs in an environment where, from the perspective of corporate taxation, the international maritime industry is one of the sectors that is often taxed at some of the lowest tax brackets, if compared to other business. This article fulfils the threefold purpose of (1) discussing the international standards to which the international maritime transport network is subjected, from international public law and environmental law perspectives; (2) analysing the international tax regime applicable to the taxation of income derived from international shipping transport; and finally, (3) suggesting future policy approaches based on the principles and premises identified, to tackle carbon emissions derived from international maritime transport. The article purports to provide a full overview of the direct and indirect tax obligations which the maritime industry is under, and suggest policy approaches to assure that the environmental cost of transport is captured in the final price of products traded internationally, in order to re- establish geographic economic equity through the application of a carbon tax instrument. I INTRODUCTION Transnational shipping, which has been referred to as the invisibleI or the forgotten industry, is responsible for approximately 90% of global trade, operating an inherently globalized business with over 60,000 vessels engaged in international trade and calling at numerous different ports and countries during the course of any given year.2 Yet, it is also one of the least taxed industries in the multinational corporate world. Part of this is due to clever tax planning, or due to 'an environment characterized by significant flexibility with respect to the national jurisdiction under which they (mer- chant ships) elect to locate the effective management of their business'.3 This flexibility is extant only because ships are - by definition - qualified as movable assets and, under international maritime law,4 may be reregistered in a different flag state within a twenty-four-hour period if a state decides to adopt more severe regulatory standards. Part is also due to an exceedingly unhealthy and unsus- tainable environment of international tax competition, where developed countries with higher regulatory standards con- cede to granting a variety of tax benefits and incentives so that the domestic shipping industry does not relocate to other sponsoring states operating 'flags of convenience' in order to circumvent the application of the higher standards of marine and environmental protection. The outcome is a scenario characterized by the institutionalized5 global spon- soring of an industry that is accustomed to influencing policy-makers into maintaining the status quo by playing into the fear that international trade 'as we know it' will collapse should merchant ships be subjected to more strin- gent tax and regulatory obligations and control. She (LL.M, University of Cambridge and LL.M, New York University) is the Green Fiscal Policy Network manager at the United Nations Environment Program in partnership with the International Monetary Fund and GIZ (www.greenfiscalpolicy.org). Tatiana obtained her PhD in Law and Economics from Wirtschaftsuniversitat Wien (University of Vienna in Economics and Business) on the topic of a multilateral carbon tax treaty. Email: tatiana.falcao@yahoo.com.br. R. George, Ninety Perent ofEverything: Inside Shipping, the Invsible ndustry thatPut Cloth on Your back, Gas Your Car, andFoodon Your Plate (1st ed., Metropolitan Books 2013). 2 International Chamber of Shipping, letter to all full and associate members (ICS(13)44), attachment 2, Traten ofShipping in the UN Double Taxation Convention Between Developed and Developing Countri Comment by the International Chamber ojShfpp g and the World Shippig Con /1 (17 Sept. 2013). 3 International Chamber of Shipping, supra n. 2, at 1. 4 G. Maisto, Art. 8: International Transport and Other Operations Global Tax Treaty Commentaries (IBFD Online 2017). 5 It is institutionalized in the sense that it has become an established practice or custom to concede to the under taxation of international maritire activities. 832 INTERTAX, Volume 47, Issue 10 c O19 Kluwer I aw Intenational WV The Netherlands

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