Shipping tax is huge threat for Malta

An environmental tax that is set to be introduced in 2024 will likely have a negative impact on Malta, particularly in its role as a transhipment hub. Malta Freeport and, in general, Malta’s economy, is set to suffer the consequences of a new form of taxation that has been signed by the Maltese government, and which will come into force as from January.

This is the European Union’s Emission Trading Scheme, through which ship owners have to pay their dues for the carbon they generate while they sail. But this only comes into effect when these ships sail into a European Union port. This means that those which choose to berth in a North African port, while still generating pollution over the Mediterranean, will have less expenses than those who do so in ports such as the one in Birzebbuga.

In an interview with The Malta Independent on Sunday, the chief executive officer of the Malta Maritime Forum Kevin J. Borg said the “likely scenario” is that Malta will lose its role as a transhipment hub, as shipping companies will start using ports of call where this tax is not paid.

There is no globally enforceable measure, so ships that enter EU ports will incur in higher expenses and those who steer clear from EU ports will avoid the provisions and costs of the directive, he said.

This, in a nutshell, is a great disadvantage to ports where this tax needs to be paid.

In another interview with this media house, maritime law expert Ann Fenech said that if big shipping lines move their business to ports outside the EU because of this environmental tax, “it will be close to impossible” to bring them back.

In spite of the pressure that is being put on the European Commission to reverse its decision, or at least postpone its coming into effect, the EC is pushing ahead with the directive, perhaps not understanding the impact that this will have on the industry. And, when shipping agencies decide to move elsewhere – to ports where they are not obliged to pay any taxes – the ports that will suffer the most are those that are within EU shores.

This is the result of regional laws that cover one set of countries in one way, and another set of countries in another way. Shipping companies see their bottom line first and if they can save money by entering one non-EU port instead of an EU port then they will do so.

The Maltese government has been strangely silent on this issue. Usually, it is very prompt to reply to any form of criticism that is levelled against it or any decision that it took. In this matter, however, it has remained tight-lipped.

Does the Maltese government not realise what is happening? Did it not take all this into consideration when it signed up for the shipping tax?