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The Panama Papers: part one

The Panama Papers: part one

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It is said that if you place a frog in a saucepan full of cold water, put the saucepan on a cooking stove, and heat the water slowly to boiling point, the frog will not jump out of the pan, but will stay in the gradually warming water, until it is boiled to death.

Personally, I doubt this. The frog that I retrieved from the road outside my house and placed carefully in the back garden last Sunday made every effort to get away, assisted by froggy common sense and a powerful pair of legs. No fool, that frog. I could not have got him into the pan in the first place.

Still, our apocryphal frog conveys the message that it is possible to get used to just about anything, particularly if things start off nicely, and then get gradually worse.

There was a time, now passing out of the minds of most people, except, perhaps, the legendary Jim Davis of the IMIF, whose memory goes back to his joining the P&O in the 1940s, at a time when it had a ship for every day of the year and no two of them alike, there was a time, I say, when ‘flags of convenience’ were not considered to be quite the proper thing. Indeed, a spirited attempt was made to prevent Panama, Liberia and Honduras from having voting rights at the Inter-Governmental Maritime Consultative Organisation, (IMCO) the more modest and more effective forerunner of today’s International Maritime Organization (IMO), on the grounds that they were not real maritime states, and did not deserve to be heard.

We may also note, in passing, that people who pursue discreditable occupations, be they prostitutes or debt collectors or Port State Control inspectors, start by feeling ashamed of themselves, and gradually convince themselves that they have nothing to be ashamed of.

Furthermore, in our industry, we learn most of what we do learn, as younger women and men starting in shipping, by “sitting next to Nellie” and seeing how our elders and betters go about things.

I have just spent six paragraphs explaining why we, the merchant shipping industry, find ourselves where we are today, as the people who invented ‘offshore’ (note the word!) tax havens, and profited from them mightily, to the point where most governments in the developed world have given up trying to collect taxes on the profits of shipowners, and (this is the important bit!) we have lost any sense that this might be, in some sense, ‘wrong’.

If challenged, we will probably respond by making some reference to the efficient working of the free markets, which have reduced the cost of carriage by sea to about 1% of what it was, in real terms, in the days of the sailing ship.

The fact that this has come at a cost tends to pass us by. We complain that when something goes wrong, and a ship makes a mess, or kills people, we are held to blame, we complain that merchant shipping is “invisible” to the general population of the rich world, and almost all of the poor world, forgetting that we employ almost nobody and that we pay almost no taxes. We complain that our ships are molested by pirates, the very lowest class of criminal, hostiis humani genus, enemies of the whole human race, a class of criminal once thought to be so extinct that they could be made the stuff of comedy, and we complain that our ships and our colleagues at sea are not protected by naval forces. But we employ almost nobody and we pay almost no taxes.

Over the past couple of days, we have seen the people of Iceland, a small and law abiding nation in the North Atlantic, which lives mainly by exporting fish, rise up against their elected government and demand that their prime minister should resign. As I write, more than one Icelander in ten has signed a petition to this effect, and the shamed prime minister has indeed gone.

Iceland is a small Nordic place, and its citizens are more easily shocked than the rest of us. The last time I saw an Icelandic merchant ship, it was serving as a backdrop in the children’s film, Paddington. It seemed oddly fitting.

But perhaps we need to wake up and pay attention to the events in Iceland; they may be replicated elsewhere, and we are looking very much like the People Who Are To Blame.

We see ourselves as Heroic Merchant Venturers; everyone else sees us as a dodgy bunch; tax dodgers who corrupt politics and who lurk in the shadows.

 

To access The Panama Papers: part two click here and for part three click here.

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Andrew Craig-Bennett

Andrew Craig-Bennett works for a well known Asian shipowner. Previous employers include Wallem, China Navigation, Charles Taylor Consulting and Swire Pacific Offshore. Andrew was also a columnist for Lloyd's List for a decade.

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7 Comments

  1. Captain C. Allport FNI
    April 6, 2016 at 8:34 am

    …waiting for part two?

    1. R. Knight
      April 6, 2016 at 11:02 am

      So am I.

  2. Paul Ellis
    April 6, 2016 at 9:20 am

    A good part one Andrew but I can think of better analogies than prostitutes and debt collectors. How about politicians and bankers? Both those occupations can now (fairly?) be described as discreditable.

  3. sorrel
    April 6, 2016 at 3:36 pm

    Indeed waiting for part 2, however, as I was mentionning to some customers yesterday, owners are able to face the current low market -and able to swallow such- thanks to some countries like Panama – or any tax haven countries- such countries being easy going on the Tax policy for the company registered out there. Put this current market together with no tax haven option and our whole shipping system would have collapsed already. no?

  4. TMoney
    April 7, 2016 at 7:26 pm

    The first step to recovery is to admit you have a problem. Eleven steps to go.

  5. Alan Hill
    April 10, 2016 at 8:20 am

    It seems to me that we have a regulatory framework that is both overbearing and ineffectual. The worst of all possible worlds and a happy hunting ground for unscrupulous shipowners and smart lawyers.
    A situation not dissimilar to the UK tax code which itself is a contributor to the ‘Panama Effect’.

    1. Andrew Craig-Bennett
      April 10, 2016 at 11:55 am

      I agree entirely. It is also a recipe for corruption.

      The requirement that ships carry “original” paper documents and produce these to Post State Control inspectors is an example of the sort of thing… in one case a ship called at a Russian port, the ships papers were taken ashore by the Agent, and thirty minutes later PSC showed up, demanded that they be produced and fined the ship US$500…

      We have rafts of un-intelligent regulations, un-imaginatively enforced, wasting huge amounts of time.