After several years of huge profits for the famous Danish container company Mærsk, politicians are opening up to consider the tax system that is lenient towards shipping companies.
In the first six months of 2022, Maersk achieved almost the same profit as in the whole of 2021, which was a record year in terms of huge profits.
Over the past year and a half, shipping company AP Møller Mærsk has made profits of 420 million Danish kroner per day. Last year's accounts showed record profits of 117 billion Danish kroner, and today's half-year accounts show that the company has largely reached the same amount in six months.
However, like other shipping companies, Mærsk does not pay corporate tax on income that comes from shipping, but pays a “cargo tax” which is much lower than income tax, and last year was around 4%.
Politicians from the Enhedslisten and SF parties believe this is far from correct, and want to replace the cargo tax – which can be compared to a weight tax on ships – with a regular corporate tax.
Huge sums of money
Lisbeth Pech-Poulsen, the SF party's business spokesperson, points out that Denmark has a "particularly generous system" for shipping companies, which is currently unjustifiable. According to DR, she stated: "I think many people have a feeling that something is wrong when you make historically high profits but pay historically low taxes, and the high shipping costs are passed on to Danish consumers. There is something completely wrong when you can make so much money that Novo Nordisk looks like a dwarf in comparison and doesn't even come close to paying taxes like the rest of the Danish business community.".
Henning Hellestedt, the Unity List's transport spokesperson, stated, according to the same source: "I simply cannot understand how the Social Democratic government wants to name the fact that a company earns such an outrageous amount of money as Maersk does in this case, and just say, 'That's what it is.' A characteristic of the Social Democratic government should be that it wants to demand that Maersk contribute more to the state treasury.".
Supervisor Carl-Johan Dalgaard explained yesterday to the Berlingske newspaper that he also sees no point in maintaining the cargo tax.
exceptional circumstances
Mikkel Emil Jensen, senior analyst at Sydbank, points out that the huge sums are due to exceptional circumstances that Maersk did not create itself, but benefited from because shipping rates exploded: “When the coronavirus hit in the spring of 2020, there was a huge imbalance. Demand for goods and materials increased, but there were not enough ships at sea to transport them. This led to higher shipping rates, and all container shipping companies made unprecedented profits. These are exceptional circumstances that will not last.”.
Mikkel Emil Jensen expects prices to fall, which will lead to lower profits for shipping companies compared to previous times.
According to SF and Enhedslisten, these are not excuses for keeping the cargo tax at the expense of the regular corporate tax.
It is difficult to change the characteristics of shipping companies
The politicians had long advocated replacing the cargo tax with the corporate tax in place in the Danish business system, and they realized that it would be difficult to gain a majority in the Danish parliament.
DR reported that it contacted the Ministry of Taxation for comment from Tax Minister Jeppe Bruce, but the ministry did not respond.
Share buyback
In a consultation on cargo tax last December, then-Tax Minister Morten Bodskov said: “I see the cargo scheme (cargo tax policy) and the DIS scheme as essential and up-to-date requirements for maintaining Denmark’s status as a maritime nation with many maritime jobs on board ships and on land.”.
Maersk stated regarding the accounts that, as a result of increased expectations of higher profits, it will accelerate its share buyback program, as this type of acquisition boosts the company's share price and gives shareholders higher dividends, given that there are fewer outstanding shares. Instead of buying $2.5 billion annually until 2025, they want to add another $500 million annually.
At the current rate, this corresponds to Maersk spending 87 billion Danish kroner on buying back its shares over the next four years.
(Source: DR)
