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Feb 21, 2012

Albanese's shipping tax fiddle a taxpayer rort

Government’s growing enthusiasm for handouts is on display, with Anthony Albanese releasing draft legislation to give the Australian shipping industry $62 million in annual tax benefits and concessions. Glenn Dyer and Bernard Keane report.


The government’s growing enthusiasm for industry handouts was on display yesterday when, with politics and the media dominated by the argy bargy over the prime ministership, Infrastructure Minister Anthony Albanese released for comment draft legislation to give the Australian shipping industry $62 million in generous annual tax benefits and concessions.

Under the proposed new laws, some of the world’s biggest and richest shipping companies would register here and benefit by dipping into the pockets of Australian taxpayers — groups such as Japan’s Mitsui OSK, Singapore’s Neptune Orient, Evergreen of Taiwan and the world’s biggest container line in Maersk. Passenger vessels and groups such as Cunard, Carnival Cruises or P&O will be able to take advantage of improved depreciation value and a generous definition of shipping to include passengers as well as cargo.

Albanese spruiked the changes in The Australian:

“Our industry has declined from 55 ships in 1995 to just 22 today. This is despite the fact Australia accounts for 10% of the world’s sea trade. But while 99% of our international trade is carried by ships, only 0.5% of that is carried by vessels displaying the Australian flag … With so few ships, an ageing fleet and a declining workforce, our industry is facing extinction. Such a collapse is not just an economic tragedy. There are security and environmental reasons an Australian shipping industry is essential.”

Albanese, at least, didn’t hide what the “reforms” on “our blue highway” were about:

“At the heart of the package is tax reform. We recognise foreign operators enjoy very competitive rates. We want not simply to catch up but to lead them. Thus the tax arrangement agreed to includes a proposed zero tax rate. In other words, Australian-based companies with vessels registered here, including those that will operate internationally, will pay no company tax. There are conditions: ships must be Australian-flagged, they must embark on training new mariners, once they elect into the exemption they must remain there for 10 years and there will be a 10-year lock-out period to curb tax avoidance.”

It’s the oldest protectionist argument of all — the foreigners are wasting money subsidising an industry, so we should too. The $62 million total isn’t a lot in the scheme of things, but that’s how a lot of old-style protectionism started as well.

And nowhere does Albanese address the question that must always be asked: who will benefit?

An explanatory paper issued yesterday had the detail and its devils. Section 2 is the important one, detailing just what “shipping” will meet Australia’s low bar:

  • carrying the shipping cargo or shipping passengers on the vessel;
  • crewing the vessel;
  • carrying goods on board for the operation of the vessel (including for the enjoyment of shipping passengers);
  • providing the containers that carry shipping cargo on the vessel; and
  • loading shipping cargo onto, and unloading it from, the vessel.

But tugs and offshore vessels (working for oil companies, maintenance groups, explorers and services groups, especially in the busy waters off the northern WA coast) are explicitly omitted. It seems they don’t do the same work on “our blue highway” that cargo and passenger vessels do for the country, even if their work is very necessary to generating national income.

But here’s why the legislation is a rort. Right now the global cargo industry is depressed because of oversupply of all sorts of ships, from giant tankers to huge iron ore, coal and grain carriers. Too many were built from 2008 onwards, too many remain to be built and delivered over the next three years. The only vessels not in oversupply are LNG tankers, which have been mopped up by Japan in the aftermath of Fukushima.

Global shipping rates as measured by the Baltic Dry Index have slumped to near-record lows, not because there is a downturn in demand (far from it, especially in iron ore, coal and grains and oil), but because of the expanding oversupply. BHP Billiton, Rio Tinto, Fortescue, Xstrata and other companies charter these ships on a short-term basis and don’t worry where they are owned; all they are interested in is cost, safety levels and reliability. These ships are mostly already owned and operated from low-tax countries or countries offering flags of convenience.

And who else ultimately benefits from this? The Australian shipping industry, such as it is, mainly consists of the Maritime Union of Australia. The MUA will be the big winner from incentives for training and local crewing. As Albanese points out, the Australian seafaring workforce is declining and ageing. Taxpayers will be helping to revitalise the union’s membership.

Finally, the claim by Albanese that “cleaner, better maintained Australian ships” would be better for our “precious marine ecosystems” is a furphy. Clean, well-run ships are possible now, just better, tougher and more vigilant supervision is needed (and would be needed in the case of more Australian-owned-and-crewed vessels). The same applies to better security.

We don’t need an Australian fleet that’s not commercially viable; Australian ships are no automatic guarantee of more environmentally friendly operation or better security. It’s how the regulation and oversight is carried out is the key to prevent or stop problems happening. That’s the government’s current and future responsibility at all times, not just through a nice tax fiddle.



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25 thoughts on “Albanese’s shipping tax fiddle a taxpayer rort

  1. gapot

    If you can get a crew from the 3rd world to work for $5.00 dollars a day to work on Australian flaged ships you would need too spend a lot of tax payers money to make it viable. We need jobs for the vast unskilled masses that are on the dole and we cant expect that money supply to keep coming in future.

  2. Whistleblower

    Another union focused rort. Albanese is a complete and utter disgrace. Tax payers dollars are being used to nothing more than boosting union membership. This is another appalling misuse of political power by the Gillard government.

  3. Matt Hardin

    Serious question. What will Australians do once we outsource all of our jobs in the name of efficiency?

  4. Gavin Moodie

    Depending on what is meant by ‘outsource’, no country can outsource all its jobs: waiting on tables, caring for the infirm, nursing and teaching all have to be done on shore. Since services account for the big majority of jobs in all advanced economies, there will remain plenty of jobs even if most jobs in the primary and secondary industries were exported.

    But employment need not even fall in Australia’s primary and secondary industries if Australia increases its innovation in these industries.

  5. geomac

    The article has one big flaw in that the decimation of the ANL by Howard is not mentioned . In the USA all ships that work the mainland are manned , built and owned by american companies , the Jones act . Howards determination to kill off unions destroyed our shipping line and allowed foreign ships to not only gain more work but push out Australian workers doing coastal shipping .

  6. Suzanne Blake

    @ Matt Hardin

    Good question.

  7. Suzanne Blake

    @ Whistleblower

    Correct, its all about boosting Union Membership

  8. snesn1

    Albanese’s electorate currently lacks a viable shipping industry. With the appropriate subsidies we could have packet steamers plying the Cook’s River delivering premium coffee blends to the cafes that front this magnificent artery.

    Think of the boost to national pride and the marvellous tourist attraction that would result. Surely this is another Year of Implementation and what a visionary implementation this would be. Such projects are truly the mark of a Great Society.

  9. Matt Hardin

    I am aware that some jobs cannot be outsourced but I note that none of your examples are high status, high paying jobs. Will our children be left to look after the plutocracy as they flit through on their way to somewhere else – or stay because they like the weather? Are we moving away from the classless society because we have decided that profit is more important than society?

    It is a serious question. What do we do when we stop being a country and start being an economic unit? What does that mean for the people?

  10. Simon Mansfield

    @ Gavin

    The service industry jobs will be mostly gone in a couple of decades.

    The Japanese are working very hard to develop robots to do much of the aged caring support needed for their fast aging population. They are motivated in part to do this to avoid importing the labor to do the jobs, as this will in time lead to a complete racial change in the Japanese population. Something Japan has no intention of letting happen. But the spinoff for the rest of the first world will be cheap non human based aged care services.

    All across the service sector the waiting jobs and other low skilled jobs such as serving people in shops etc are going to disappear as robots move in. Just go to any newly renovated K Mart or Woolworth’s to see the newly installed banks of self service checkouts. The Nowra Kmart is down to 2 human checkouts and a couple of self service supervisors.

    As to teaching – there is no reason why that can’t be further outsourced in more and more classrooms via tele-teachers – be they in Australia, India or simply another robotic based software solution. The NBN will make this all the more feasible and is one of the reasons why the government is wanting the rollout to be near universal.

    It’s estimated that 3D printing could eliminate over a billion jobs in the next 20 years. The advent of cheap replication technology along with robotic based agriculture, transport, service provision and a whole of host of other sectors will fundamentally change today’s economic social contract.

    We are reaching the age of Peak Human – where the economic need to have a large population to do the work and enrich the owning class is drawing to an end. It’s by far the biggest issue facing humanity and makes climate change little more than a high school science fair project.

  11. Gavin Moodie

    Some service jobs are high status and high paying: medicos, many allied health practitioners, academics, lawyers and accountants. Because they require complex judgements they are unlikely to be automated soon.

    One could seek to increase the importance of culture to Australia. But even if that also seems unlikely soon, I am not so pessimistic. Much of Australia’s primary and secondary industry has been innovative for many years and succeeds on innovation and quality rather than price. I offer as 2 examples the wine industry and medical instruments. Australia should do more of that.

  12. Peter Ormonde

    Simon …

    Peak human… you mean Gina Rinehart??? That’s the pinnacle of human evolution… I find myself think that’s rather disappointing. But it’s an interesting notion.

    I reckon that the idea of replacing fossil fuels with humans will be the go – a return to the good old days, before the steam engine and petrol … some sort of slavery. I see Gina being carried down to Aldi by a squad of Nubians for yet another crate of Tim Tams.

    Not far wrong actually.

  13. ScottMC

    This level of discretion over public funds – with business interests involved – should probably be put to some kind of parlia-judicial review. Why?

    It looks a bit suss.

  14. AR

    Sounds like a great opportunity for a revival of the old Star of Asia passenger run from Oz to Singapore or Columbo.
    With modern technology to keep them quiescent in their cabins, BluRayed and, with apologies to the Baltic Dry, drunk duty free, it could be a really fun way of sticking it to QANTAS et al.
    Maybe it could even be extended to Europe, or at least Casablanca.

  15. Recalcitrant.Rick

    I like the way Suzanne agrees with Matt Hardin about outsourcing! It’s more likely to happen under the Right Wing economic rationalists than a “Socialist” Government. Once again Sooz can’t really work out what she really believes in!

  16. Suzanne Blake

    @ Recalcitrant.Rick

    I care about jobs. I care about business confidence as a confident business employs people. The Goverment current MO of destroying business confidence is costing business, costing jobs and forcing them to look at cheaper options.

    Pretty simple really.

  17. Recalcitrant.Rick

    The only people spreading doom and gloom in this country are Tony Abbott and his band of wreckers! We are the envy of the world with a vibrant well run economy, your need to talk it down does you no credit and certainly causes me to wonder if you understand ANYTHING about economics?

  18. Whistleblower

    @Recalcitrant Rick
    The so-called “vibrant well run the economy” is in spite of the Labor government not because of it, and is almost entirely due to demand from China for raw materials.

    Gillard’s carbon tax and the growing imposition of union rorts will destroy what’s left of our manufacturing industry leaving us as a “vibrant well-run” quarry until Chinese demand tapers off.

    To cap it off the government has spent nearly $200 million of borrowed funds, which successive governments will have to repay whilst carrying an interest burden of at least $10 billion a year until debt is repaid.

    Albanese’s featherbedding for maritime unions whilst “small beer” will not help anybody but the MUA.

  19. Recalcitrant.Rick

    You guys are so funny, Labour could run the economy perfectly for ten years and you guys would still take the credit. Give me a break, and check your economic history and see which political party has been the real reformers of the Australian economy! Just one example…..
    “After more than a decade of compulsory contributions, Australian workers have over $1.28 trillion in superannuation assets. (THAT’S ONE POINT TWO EIGHT TRILLION) (how many zero’s is that???) Australians now have more money invested in managed funds per capita than any other economy.”
    I wonder if that sort of Capital is of some benefit to a stable business environment? I wonder if the dropping of a protectionist tariff wall and the opening up of a free market was a Liberal decision? after all the’re the party of minimal Government interference. But no! Labour again! And we’re supposed to be the “Socialists” Pathetic!

  20. feelgoodcause

    RE: Gavin Moodie “Some service jobs are high status and high paying: medicos, many allied health practitioners, academics, lawyers and accountants. Because they require complex judgements they are unlikely to be automated soon.”

    I can see where your coming from

    Only university degrees are protected eg:Doctor as you cant seek international outsource.
    However doctors will struggle with the lack of customers who dont have jobs nor afford healthcare as the system contracts.

    Already more and more jobs are overseas such as draftsmen, engineers utilising expanding digital technology.

    Aged care is the highest employer then retail with mining way down the line. An implosion of customers.

    3D printing has some way to go but many things under 200000 units will be printed in Australia by your dentist, panel beater, etc. Custom products.

    Priorities should be if possible a little devaluation of the AUD. USD was 3 Trillion QEasing leaving our currencies out of whack by 25%. We are being robbed of currency at present.

    Development of technologies such as graphene hydrogen fuel storage and renewables purely for national security as oil shocks caused Keatings recess.

    If China is fudging the books as has been mentioned we could be looking at an economic Yatzee.

    There has been some international currency manipulation. AUD is leaving the country. Yeah, Australia, highest private debt in the world. Currently the globe has a fiscal blackhole.

    We wont need Gonksi if something isn’t done, now.

    ” Its a trap!!!” Admiral Ackbar

  21. Peter Ormonde

    Yes it’s a shocking country this … crawling with unionists, incompetent governments, taxes, riots, lies, scandals, borrowed money …

    A few like minded friends and I – Troofie, Sooz, Patriot and a few others …are organising a pea green boat with lots of honey and plenty of money and plan to escape…

    The MV Alan Jones will set out for Afghanistan in a few weeks. Low tax, small government and no public sector debts whatsoever.

    Sail away … sail away with us.

  22. Suzanne Blake

    @ Peter Ormonde

    I would be denied boarding on Albanese ship, not a Union member.

    I happen to be a supporter of coastal shipping around Australia. If it is very efficient from rail, road, port, it could take a lot of trucks off the road.

    Its probably greener as well.

    We are setup well for coastal shipping, but it dies out 100 years ago or more.

  23. dunph

    Well I’m probably the only person in this comment string that actually operates a Coastal Shipping business.

    Like the public transport debate, using ships instead of trucks for interstate freight is smart and cheap, but slow.

    Like catching a bus, instead of jumping in your car – or a taxi – everyone wants immediate service or “just-in-time” delivery, rather than waiting awhile.

    Overlay that fact with union overtures and a high dollar that makes importing cement from China to Perth 50% cheaper than shipping it from Australian manufacturers in eastern states: there is NO ALBO ROOM.

    Coastal Shipping, in a government-protected, union-dominated environment WILL DIE. The tax argument is crap too – as most shipping operators and their clients already enjoy this benefit via Singapore … have a look at BHP!

    The ALBO ACT will simply make importing the vast majority of cargoes that are presently shipped around the coast on foreign-flagged vessels cheaper to import direct. To put it another way, the protected-coast cost of domestic shipping will rise, thanks to ALBO, making road transport even more appealing !!

    Oh and to GEOMAC’s comments about the Jones Act – you need to get a grip – as virtually ALL of the US coastal shipping is from the mainland to Puerto Rico, Guam and Hawaii – where trucks can’t hurt their cartel margins.

  24. Suzanne Blake

    @ dunph


    With the long shipments if Unions were not a problem and we had more efficents ports like Singapore, then we may have a solution.

    But I agree all Elvis Albanese wants is more Union members


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