Cruise Law In Focus: What Cruise Ship Operators Pay In Taxes

Lipcon, Marguiles, Alsina & Winkleman, P.A

If you’re a regular reader of this blog, you know that the laws surrounding maritime issues are very different from laws that apply on land, and that is just one reason it’s so important to hire counsel that understands maritime law after you’ve been a victim of an accident, incident, or crime at sea. Our maritime legal issue in focus today is what the cruise lines pay in taxes, and who they pay it to. We’ll also look at some of the ways the cruise lines avoid tax liability.
Let us say a cruise ship is built in Finland, sets sail from the port of Miami, and flies a Liberian flag. That’s known as a “flag of convenience”– and it’s convenient for the host nation, because they demand less in taxes than first world port countries, but they are usually desperate for the cash, and don’t actually provide many services in exchange for the ship’s registry. Liberia and the cruise industry faced a public relations problem, as you may recall, in 2001, when it was discovered that tax money collected from the industry was financing a revolution in Sierra Leone. The flag of convenience works well for the cruise ship companies, too, because it is a way they avoid paying the taxes they would otherwise owe. It’s why there hasn’t been a cruise ship that has flown an American flag in more than four decades– With the exception of American Hawaiian Cruise Line which went out of business as a result of 911. About three quarters of cruise passengers worldwide are Americans. But to fly an American flag would require the cruise ship companies to have the ship built and owned in the United States, pay taxes on profits like land based corporations do, and staff the ship with American employees, who would be subject fully to American labor law. Congress made a limited exclusion to these requirements to enable NCL to take over the American Hawaiian Cruise Lines routes and continue to offer cruises in Hawaii.

What the industry does pay in American taxes: If you have ever taken a cruise, you’re aware that the cruise ship operators pay port processing fees. You’re also aware that the cost gets passed onto the consumer! When you book a cruise, the travel agent will advise you that port processing fees are not a part of the quoted price. A typical fee is about $50.00 per port. It’s quite a bit of money when you consider that there are thousands of people aboard each ship, and cruise ships set sail daily.

But it’s not a lot of money when you consider the government services that cruise ships demand. When there is an accident at sea, it’s often the United States Coast Guard that responds. There is also the environmental toll from cruise ships, which often don’t adhere to EPA standards, and the services provided by city and county governments in port cities. It takes additional civil servants to maintain order and provide for public safety if there are suddenly 5,000 people getting off a ship and entering town.

It has long been argued by activists and lawmakers alike that for all the American government does for the multibillion dollar cruise ship industry, there should be a tax liability that offsets the expense. The state of Alaska addressed the issue with a $50 per person tax. To passengers’ chagrin, the end user incurred the cost. The tax, however, was less than two percent of what even the least expensive Alaska cruises cost. The Alaska senate cut the tax in April of 2010.
The cruise lines fight tirelessly to save money wherever they can, even by denying the rights of passengers and their own employees. If you have been denied your rights after an accident or injury, or you have been the victim of a crime while on a cruise, contact an experienced cruise accident lawyer immediately.

If you think the Cruise Lines are getting a free ride on your tax dollars contact your State Representative and/or your Congressman and ask them to explain to you why they favor the Cruise Lines over your rights and subsidize them with your taxes!