THE South is set for strong gains as a result of the government's move to introduce a tonnage tax for the shipping industry.

Laying at the heart of a wider shipping policy package, the new tax is aimed at boosting one of the country's most vital commercial sectors.

For a long time the South's maritime companies, especially in and around Southampton with its booming port business, had been urging Whitehall to bring in the tax and there was deep disappointment when the Chancellor did not include the changes in the last budget.

Now, following an independent inquiry, the government has indicated the tonnage tax is on course to provide a major boost for the British flag and increase sea-going employment.

The measures are designed to stop ships leaving the UK register and to attract departed tonnage back.

One of the first places in the region to see early benefits will be Southampton Institute's maritime faculty and Warsash Maritime Centre, which could see up to double the number of students.

The maritime faculty already runs a BSc in shipping operations designed to prepare students for a career in the shore-based shipping industry and this summer has launched two new courses with Warsash Maritime Centre that offer a degree-level entry for employment at sea for deck and engine cadets.

"The introduction of the tonnage tax will be a big boost to a course that already sees all its students either employed or going on to further study by the time they graduate,'' said shipping operations course leader John Hoar.

"In addition, our new merchant shipping degrees were designed with the tonnage tax in mind as the proposals include a compulsory training levy to ensure there will be sufficient new entrants into a seagoing career.

"This should help attract more young people into the shipping industry which offers great career opportunities.

"Despite our satisfaction at the announcement, we will contain our celebrations until we see the precise mechanics of this fiscal concession, but is safe to say that this will help build on the country's maritime success and will attract more maritime jobs to Southampton and the UK.''

A tonnage tax has already been introduced in the Netherlands, Norway and Greece where it has proved a success in attracting maritime business as well as being credited with tempting shipping lines away from so-called overseas flags of convenience.

P&O has already led the way in Britain with a commitment that the company will bring back at least 50 ships to the British register, including the world's biggest cruise ship, Grand Princess, captained by Commodore Mike Moulin, from Lymington.

The UK tonnage tax proposal has an additional dimension to the regimes in other countries.

This includes a formal linkage under which, for every 15 officers they employ, of whatever nationality, companies subject to the tonnage tax would be obliged to recruit one new trainee every year.

Over the three-year training period, this should build up to hav-ing about one cadet in training for every five officers in employment.

If the company is not able to fulfil that commitment, it must make a proportionate contribution to a Maritime Training Trust fund additional training by others.

THE new tonnage tax is poised to kick-start British shipping and provide new drive for closely connected industries.

That is the view of the president of the Chamber of Shipping and P&O main board director, Graeme Dunlop. "This is marvellous news,'' he said.

"The new policy package will underpin the future of British-owned shipping and of British sea-farers.

"The UK will once again be a country which encourages maritime business.''

Mr Dunlop went on to say he hoped that within one or two years the UK register will have dou-bled and that he expected that within a further two years the industry will also double the numbers of new seafarers it recruits.

"This expansion will also have a dynamic effect on Britain's wider maritime industries ashore,'' said Mr Dunlop.

Thousands of people in the South rely on the shipping industry directly and indirectly for their livelihood and the sector is a huge contributor to the commercial success of the region.

Mr Dunlop said British companies would be far more likely to place equipment orders here than foreign operators.

Maritime manufacturers, refits, repairs, supporting engineering suppliers, such as those in and around the port of Southampton, and the services of the City of London were all likely to get a significant boost.

TONNAGE TAX FACTS

A tonnage tax is a specific method of corporation taxation for the shipping industry which is paid according to the size of the company's fleet, rather than on profits earned by the company.

Under an agreed formula which relates directly to the tonnage of individual ships, an artificial level of profits is calculated which is then subjected to the standard rate of corporation taxation, currently 30 per cent in the UK.

As an option to depreciation and other allowances, tonnage-based taxation has become a conventional form of taxing merchant shipping internationally, particularly in Europe.

Although the level of tax payments that many companies currently pay may not be significantly affected, a tonnage-based tax enables the company to have the advantages of :

Certainty, since the level of tax will be known, which will reduce the need to make provision for deferred tax and increase earn-ings per share.

Flexibility, since companies will have more freedom to choose when to buy ships and how to finance them.

Clarity, since the company's tax position will be more readily understood by, and attractive to, investors and analysts

Compatibility and competitiveness with other countries' regime for companies in international partnerships.

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