ITF Calls Out Flags of Convenience

With the leaked Panama Papers shining a spotlight on the use offshore accounts to hide investments by of some the world’s most powerful people, the International Transport Workers’ Federation is using the exposure to call out foreign flags of convenience as a prime example of the sort of tax avoidance activity that seems to fly under the radar with tacit approval.

The Panama Papers, containing some 11.5 million documents leaked from the Panamanian law firm Mossack Fonseca, have uncovered an intricate web of offshore accounts used by some of the world’s most prominent politicians, business leaders and celebrities to conceal their wealth and avoid paying taxes.

“Money laundering, terrorist financing and tax evasion are all clearly unacceptable practices and at odds with the global union movement’s social and economic justice agenda that we at the ITF promote through our work with transport unions around the globe. Equally of concern to us is large-scale corporate tax avoidance that directly impacts on public investment and essential services,” commented ITF General secretary Stephen Cotton in a statement released by the ITF on Thursday.

“Much of this activity has been allowed to go on in plain sight with minimal steps being taken to hold companies or individuals to account. It is right that the sheer volume of the crisis and the impact of these widespread financial abuses have been put into the public arena. It is time to take the kind of definitive action the ITF has been involved in for years to stem this corporate greed,” Cotton added.

In particular, Cotton singled out the flags of convenience as an example of the very sort of abusive tax avoidance activities that seem to fly under the radar.

“Take our flags of convenience (FOC) campaign launched in 1948,” the statement said.

“Registering a ship under a FOC, where a vessel is owned in one country and flagged in another, is also a system of tax avoidance. As an FOC flag – the largest in the world – Panama is essentially a tax haven like many of the UK territories that have been mentioned in these papers. And who pays the price? Seafarers, who are subject to poor conditions and lower wages because they’re at the mercy of a system that allows for minimal regulation and the acquisition of cheap labour.

“The ITF believes there should be a ‘genuine link’ between the real owner of a vessel and the flag the vessel flies, in accordance with the United Nations Convention on the Law of the Sea (UNCLOS). FOC registries make it more difficult for unions, industry stakeholders and the public to hold ship owners to account.

“In many cases, the registries themselves are not even run from the country of the flag. Some FOC shipping registers are franchised out to foreign companies and are also corporate registers. The Liberian Registry, the second largest in the world, is administered by the Liberian International Ship and Corporate Registry (LISCR), a wholly US owned and operated company.

“The ITF’s campaign, compelling owners of FOC flagged vessels to sign agreements which guarantee certain terms and working conditions for crew and policing these through a network of inspectors, is the only thing that goes some way to redress the balance of the FOC tax avoidance scheme, and to recognize the human cost it has.”

Expanding on the ITF’s frustrations, ITF president Paddy Crumlin commented: “Let’s look at oil and gas multinational Chevron. The ITF produced a report last year highlighting the amount of tax revenue which could be lost in Australia through the company’s complex profit shifting and tax avoidance schemes. The amount is shocking. What the revelations in the Panama Papers have brought to the public’s attention is that this kind of activity, which directly disadvantages ordinary hard working people, is happening all over the world while governments sit back and fail to take responsibility for the loopholes that allow it to continue.”

He went on: “If Chevron and other multinationals paid the tax they should be paying, austerity wouldn’t be an issue. We wouldn’t be seeing cuts in funding for education, public transport, healthcare.”

“The kinds of deliberate and extreme incidences of tax avoidance being run from Panama are examples of the way corporate power avoids its obligations to society, communities and workers. We’re pleased that these incidences are now being taken up more widely in a public arena so that they can be properly investigated and we hope to see action taken against those who have disregarded their responsibilities in the name of profit.”

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