Cruise Tax Impact on Future Sailings

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If the much-discussed tax bill currently making its way around Washington goes into effect, cruisers might find themselves paying extra in the future.

Travel Agent Central reports that a new cruise tax that is buried within the proposal could cause the major lines to take a look at their operations. But as one might expect, the Cruise Lines International Association (CLIA) is actively involved in negotiations designed to negate the impact on passengers.

What The New Cruise Tax Would Mean

During Royal Caribbean’s recent earnings report conference call, the company’s chief operating officer, Adam Goldstein, was asked about how Washington’s tax policies might impact the cruise industry. “We, like probably every other company and industry in America, [are] watching very carefully what’s happening in Washington,” he acknowledged.

“Our industry association, CLIA, and our tax advisors are clearly spearheading that. We’re not expecting any changes at this point, but this is a fluid situation. We have to watch every day.”

To a certain extent, he hoped the cruise industry might fly under the radar. “Although we’re growing and we’re proud of our success and where we’ve come over the last 50 years,” he reported, “[cruising] is still a very small industry in the scope of the types of things that seem to be on the radar screen for politicians in Washington.”

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If a picture is worth a thousand words, is a sunset at sea worth a few extra dollars? (We’d have to say yes… )

In looking at how the industry might be impacted, UBS Investment Research analyst Robin Farley notes that the proposed tax bill includes a proposal that would cost American cruise lines approximately $70 million per year. It would involve the lines paying a tax based on the days ships spend in US waters.

“If this were passed into law,” Farley reported, “the cruise lines could respond by training to alter some departure points, though it would be difficult to change that meaningfully, in our view.”

She gave the cruise-related provision a 50 percent chance of being included, in some shape, in the finalized version of the bill currently being negotiated.

A rep for CLIA told Travel Agent Central, “Actual legislative text has not been made available, so it would be premature to speculate at this time. However, we are engaged with key policymakers to ensure a vibrant business environment for the cruise industry.”

Could A Cruise Tax Be Passed On To Consumers?

Obviously, whenever a business encounters a new expense, it is passed on — in whole or in part — to consumers. This holds as true with taxes as it does anything else. (Take, for example, the fact that even cruisers with the Ultimate Beverage Package on Norwegian Cruise Line wind up having to pay a per-drink tax on drinks in ports such as New York City or Port Canaveral. Carnival avoids this on sailings out of New York City by not allowing the Cheers! package to become active until the second day of the cruise, when taxes are no longer an issue.)

Thus, it’s not too big a leap to assume that if cruise lines are hit with a tax for each day they are sailing in US waters, that expense will either be folded into the initial cost of a cruise or, like port fees and taxes, listed as a separate, additional fee.

Should the government raise money by charging a “cruise tax?”

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