Cruise lines tax increase has been proposed by U.S. Commerce Secretary Howard Lutnick, citing foreign registrations to avoid U.S. taxes. While this move could impact cruise companies, passengers shouldn’t expect immediate changes.
Why Do Most Cruise Ships Have Foreign Registrations?
The Bahamas, Panama, and Liberia are among the nations where the majority of large cruise lines register their ships. This tactic, referred to as the “flag of convenience,” enables businesses to benefit from lax labor and tax regulations.
These cruise lines are nonetheless categorized as foreign firms even if their headquarters are in the United States. Like other companies, they are free from paying federal income tax because of this status.
Norwegian Cruise Line’s Pride of America is the only significant cruise ship flying the American flag. It was first constructed in the United States, but after its first plan failed, it was eventually finished in Europe.
Do Cruise Lines Have to Pay Any US Taxes?
Yes. Cruise lines pay at least $2.5 billion in taxes and fees in the US, according to the Cruise Lines International Association (CLIA). This amounts to 65% of their global tax payments. The majority, however, do not pay federal income tax on their profits earned in the United States.
Bipartisan support for this arrangement, which has been in existence since 1921, has helped to preserve trade reciprocity. There have been previous proposals to raise taxes on the cruise sector, but they have never taken off.
Could Cruise Prices Increase Due to Higher Taxes?
Although Lutnick has made references to tax increases, no detailed proposal has been made public. Cruise fares won’t rise right away, according to industry observers. Cruise operators may, however, pass along a portion of the expenses to guests if a tax is imposed.
Additionally, companies may change their routes to avoid ports in the United States, which might have an effect on cruise tourism in the United States. Until further information becomes available, passengers may book their cruises without worrying about price increases.
Source: USA Today