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Give Cruise Lines A Break

A recent report from the Cruise Lines International Association (CLIA) tells us that in the United States alone, 10.4 million people took cruise vacations on CLIA member lines in 2011, contributing over $40 billion to the US economy. If we stop right there, this sound like a really good thing for a recovering U.S. economy; something that should be encouraged. Still, there are those who would call the cruise industry in for questioning before a Congressional hearing, attempt to regulate what they do and publicly cry out for something to be done about them.

Why? Being foreign-flagged vessels, U.S. based cruise lines pay little or no taxes.

“The cruise lines take advantage of an obscure provision in the U.S. tax code which permits shipping companies to evade taxes by incorporating overseas and flying the flags of foreign countries,” says maritime attorney Jim Walker on his CruiseLawNews blog, in the game since 1983, adding “That’s why Carnival is incorporated in Panama, Royal Caribbean is incorporated in Liberia, and Princess Cruises is incorporated in Bermuda. “ And he’s right. Absolutely. No doubt about it.

My thought: So what?

Who, in business today, would not want to enjoy the benefit of paying little or no business income taxes? How much better, how much healthier, would any business be if they did not have to pay corporate income taxes?

Really. Think about it.

Cruise CompeteYears ago, I owned a small restaurant and dutifully paid in taxes required by law. During another economic slowdown, this one in the ‘80’s, I ended up closing the doors on that place. Had we been able to skip those taxes, we might still be there today. Such is the case for many small businesses. Big business too, does what they can to avoid paying US taxes. Apple has iPhone parts made outside of the US to avoid payroll taxes. Land-based operations for cruise lines pay those.

Admittedly, it’s a weak argument to be in favor of cruise lines, but I can sure see how being foreign-flagged has its allure. That same rule limits liability when things go wrong too. To me, that part is far more important than if they pay taxes or not.

The recent case of some cruise passengers being held at gunpoint on an island where crime is a known problem is a good case in point. At first, our legal system threw the case out agreeing that it is impossible for a cruise line to know everything about every shore excursion they offer. On appeal, it looks like the matter will get another look, rightfully or not. The foreign-flagged element will no doubt come in to play here too and end up saving the cruise line from an even longer legal battle.

That CLIA report also tells us that worldwide, 16+ million people sailed in 2011 and U.S. cruise passengers made up 10.4 million of that total. U.S. ports handled 60 percent of all global cruise embarkations, with nearly 10 million passengers sailing just from American ports. That’s good news for a healthy cruise industry, mostly American-based. From a purely financial view, that’s good news for the American ports those ships call “home”, the place they begin and end their itineraries.

Each time a ship stops, American goods are loaded on board and American services are engaged to support the ship’s arrival. Passengers embarking and disembarking use land-based transportation services, eat at local restaurants, shop at local stores and more, all contributing to the American economy. At the same time, all those passengers pay sales tax on those good and services they use and the cruise line pays port charges and government fees every time it docks, some of which is included in the price of a cruise fare.

So let’s turn it down a notch on the “cruise-lines-are-getting-a-free-pass” propaganda.

Some taxes are indeed being collected that can be directly attributed to cruise ship operations. Cruise lines provide jobs for crew members that come from impoverished nations where jobs are few and a future even more scarce. Cruise lines give back to society via involvement in a number of charitable organizations. They run safe ships that exceed the demands of International law, have passenger safety as their #1 priority and provide a good vacation value in the process.

Close the book, lock the door and move along; one of the very best parts of what cruise lines do is allow many Americans who might not otherwise have traveled, to get out and see the world.

They provide their cruise vacation product in a safe, secure environment that is unmatched in terms of quality, variety and value. They back it up by exceeding expectations when things go wrong, not because they have to, because they know that to continue to succeed in the long-run, they need to.

“In this uncertain economic environment, we are pleased to demonstrate the importance of the North American cruise industry to the U.S. economy in creating jobs and positively impacting the residents of all 50 states through direct and indirect spending,” said Christine Duffy, CLIA’s past president and CEO, summing it up nicely, concluding appropriately, “These findings are further evidence that the industry’s ability to provide outstanding choice and value that resonate strongly with consumers work in beneficial ways for the country’s economy as well.”


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