Impact of anti-tax avoidance rules on factors influencing the choice of registry for the self-owned vessels of the shipping lines

Shipping lines avoid tax burdens and policy requirements by registering their self-owned vessels in flag of convenience (FOC) countries and establishing subsidiaries in those countries. However, since the international tax system has been increasingly focused on substance, coherence, and transparency, the anti-tax avoidance rules may have affected the choice of registry for shipping lines. Based on the 900-ship registry data of the top 25 liners across 26 flag states over the period 2008 to 2019, this paper uses conditional logit and mixed logit models to examine the effect of anti-tax avoidance rules on the choice of registry for shipping lines. In this regard, the results indicate that introducing country-by-country reporting requirements and a common reporting standard will reduce the probability of shipping lines registering to flag in those countries. On the other hand, after imposing anti-tax avoidance rules, liners are more willing to register flags in countries with higher tax rates. The results of a regional analysis show that better tax performance exerts an adverse effect on flag choice of European shipping lines; however, it has the opposite effect on Asian shipping lines.