Cyprus shipping grows on tonnage tax

The rate of growth of the Cyprus shipping sector, due mainly to the attractive tonnage tax regime, is very encouraging, Transport Minister Marios Demetriades told the island’s vibrant community of ship owners, ship managers and maritime service providers.

Addressing the annual general meeting of the Cyprus Shipping Chamber, an umbrella organisation that incorporates all professional groups linked to the maritime sector, Demetriades said that the tonnage tax system, unique to Cyprus since it was approved by the European Commission in 2010, “has seen an increase in the number of company registrations, and this is expected to continue in the next few years.”

“The sustainable growth of Cyprus shipping is one of the main priorities of the government. The Ministry will do its utmost to enhance the competitiveness of our flag and our maritime cluster,” he told a packed audience at Limassol’s For Seasons hotel.

The number of vessels registered under the Cyprus flag may have dropped from 1769 in 2014 to 1704 last year, yet the output of these ships (on which they are taxed) has grown from 22.7 mln tonnes in GRT terms in 2014 to 22.87 mln last year, according to data from the Department of Merchant Shipping. Hence, despite the decommissioning or de-registration of 65 ships last year, revenues earned have actually increased year-on-year due to a bigger output by 170,000 tonnes.

Demetriades told the CSC members that “President Anastasiades is committed to the reform of the maritime cluster over the next few months,” for which plans have been concluded in close partnership between the public and private sectors of the maritime community.

One of these reforms is the restructuring of the DMS, as well as the Ministry itself, in order to help Cyprus shipping become more competitive, he said, adding that the Cyprus registry has the third largest merchant fleet in the EU.

He had earlier commented that with the reforms underway, the crisis in Greece and the prospects of a solution of the Cyprus problem (hence, the removal of Turkey’s embargo on Cyprus-registered vessels) are all factors that will contribute to the growth of the shipping sector’s contribution to the economy from 7% of GDP to about 8.5%.

“And the three contract agreements to be signed with the two partners for the commercial operations of Limassol port next week (with Germany’s Eurogate and DP World) is an additional contributing factor that will enhance the shipping sector.”

Responding to the minister’s speech, CSC President Themis Papadopoulos said he was “very pleased to see that the DMS is on a fast-track for reform” and that Cyprus is slowly but steadily coming out of the financial difficulties it experienced in the last few years.

The shipping sector was left relatively unscathed by the economic crisis in 2013 that saw the collapse of a major bank over the purchase of toxic Greek government bonds and the consequent bailout of the economy, a programme that cost ?7.3 bln of the initial ?10 bln earmarked by the EU, the ECB and the IMF. A second bank needed the bail-in of its depositors and sought new investors, while a third bank was rescued by a ?1.5 bln recapitalization by the state.

“It was very gratifying to see that during these difficult times, the shipping operational and taxation infrastructure in Cyprus and the Cyprus flag remained intact and very competitive,” Papadopoulos said, pointing out that “most importantly, Cyprus flag users remained loyal, supporting at the same time the efforts to reinforce Cyprus shipping in order to continue and enhance more its significant contribution to the Cyprus economy.”

He added, however, that long-term planning and investment in essential ingredients such as the introduction of new mechanisms to safeguard this important sector, as well as to develop and reinforce it further is therefore required.

“To that end the Chamber strongly believes that if certain measures and policies that the Chamber has advocated for are implemented and resolved the soonest, the prospects for a substantial and sustainable growth of Cyprus’ shipping is both tangible and achievable,” he stressed, adding by achieving this aim the shipping sector will also be able to play a leading role towards new economic growth in Cyprus.

During the meeting, the CSC council honoured Capt. Eugen Adami, who presided over the Chamber for the previous six years.