Up to $11 billion in potential tax revenue is slipping through the fingers of developing economies each year, due to tax loopholes exploited by global shipping giants, according to a new report by Opportunity Green.
The study titled titled “Global shipping: Mega profits, micro taxes,” reveals that the shipping industry has generated heavy profits in recent years while paying disproportionately low taxes, especially in countries under the Organisation for Economic Co-operation and Development (OECD).
Between 2019 and 2023, the world’s ten largest shipping companies amassed $340 billion in profits. However, their tax contributions shows inequality. 93 percent of the earnings were concentrated in the hands of just ten major firms, nine of which are headquartered in high-income economies.
Opportunity Green argues that shipping companies exploited tax loopholes to pay far below the average corporate tax rate that disadvantages lower-income nations.
OECD-based shipping companies, which accounted for nearly half of these profits, up to $174.6 billion, paid $5.3 billion in taxes, which means an effective tax rate of just 3.1 percent. In contrast, shipping companies based outside the OECD paid an 18 percent tax rate on their profits.
This imbalance directly impacts the global south, where much of the world’s shipping trade takes place.
Developing economies, like Nigeria, already grappling with fiscal deficits and mounting debt, lose out on a critical source of revenue that could otherwise be directed toward infrastructure, healthcare, and education.
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The Opportunity Green report estimates that, if the shipping industry were taxed fairly, governments could have collected an additional $42 billion in revenue, enough to cover global food aid programs.
The figures were gotten by analysing 139 global shipping companies, using publicly available data from their published accounts and checked with CapitalIQ financial reporting to assemble the complete database over 2019 to 2023, the last year for which a full set of accounts is available.
Findings show that the issue stems from the strategic use of tax-friendly jurisdictions.
Shipping companies, many of which operate in developing nations’ waters and ports, often book their profits in low-tax countries, shielding billions from higher taxation.
This allows them to enjoy vast financial gains while paying significantly less than businesses in other industries.
With 21.4 percent of total global container shipping involving at least one global south country, the disparity in tax contributions exposes regulatory gaps.
James Meadway, a taxation analyst, noted that the world’s four largest shipping firms, all based in high-income countries, contributed just $5 billion in taxes, a fraction of what they would owe under standard corporate tax rates.
“If these companies paid their fair share, developing nations wouldn’t be grappling with budget shortfalls while shipping conglomerates thrive on their waters,” he said.
The urgency of addressing this issue has gained traction ahead of an upcoming International Maritime Organisation (IMO) meeting in London.
The IMO is set to discuss the potential introduction of a global carbon levy on shipping, which could favour revenue generation in developing countries.
If implemented, the levy would mark the first real attempt to ensure that shipping firms contribute more equitably to the global economy.
However, resistance from industry lobbyists threatens to water down any meaningful reform. The shipping sector has historically pushed back against regulations that could increase operating costs, and there are concerns that companies may find ways to boycott the new levy if it is not strictly enforced.
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Aoife O’Leary, CEO and founder of Opportunity Green, urged policymakers to seize this moment to introduce fairer taxation measures for the shipping sector.
“The shipping industry produces a billion tonnes of greenhouse gas emissions annually, yet it continues to sidestep fair taxation. The IMO now has the opportunity to correct this by introducing a global levy that ensures polluters contribute to the fight against climate change,” O’Leary stated.
Call for caution
For Nigeria, a nation with significant shipping activity, the stakes are high if it is losing crucial funds to improve its maritime sector and ultimately its economy.
Experts say the report signals the need for closer scrutiny of tax practices in the maritime sector.
While it is yet unclear how much Nigeria loses specifically to tax avoidance in the shipping industry, the findings raise questions about potential revenue leakages and the oversight of foreign shipping companies operating in the country.
Muda Yusuf, a trade analyst, emphasised that the report uopens up a necessity for Nigerian tax authorities to examine the shipping sector more closely.
“This report draws attention to the need for proper oversight and taxation of shipping activities within Nigeria,” he noted.
Additionally, Nigeria’s Ministry of Marine and Blue Economy and other regulatory bodies may need to re-evaluate tax compliance frameworks to ensure that foreign-owned shipping firms contribute their fair share, he said.
The top ten shipping companies in question, including A.P. Moller-Maersk, CMA CGM, which operates in Nigeria’s major ports, Hapag-Lloyd, China Cosco, and Ocean Network Express, were contacted for comment on the report’s findings. Wan Hai Lines, A.P. Moller-Maersk, and Orient Overseas confirmed the accuracy of their figures, while others declined to respond.
