Senator Rockefeller to Cruise Lines: You Can't Operate for Free in the U.S.

As promised, Senator Jay Rockefeller announced that he has introduced legislation seeking to eliminate the Section 883 exemption for cruise industry income derived from cruises that embark or disembark passengers in the U.S.  Senator Rockefeller stated in a press release: 

“The cruise industry can’t operate for free here in the U.S. It costs money to send the Coast Guard to tow their drifting ships and it costs money to maintain the ports they use. Cruise lines need to start paying their fair share of taxes and stop expecting everyone else to foot the bill.”

Over the last year, Senator Rockefeller has raised concerns that the cruise industry has used the infrastructure of U.S. ports, the resources of the U.S. Navy and Coast Guard, and  more than 20 U.S. agencies, but has paid virtually no U.S. taxes. At the same time, the U.S. Coast Guard is substantially Cruise Ship Taxesunder-funded and is increasingly called upon to assist cruise lines which are experiencing fires and engine failures.

Efforts to repeal the exception have been a long time coming.  Earlier this year, as the disabled Carnival cruise ship Triumph was being towed back to the U.S. at U.S. taxpayer expense, Forbes published an article: Ship Isn't The Only Thing That Stinks At Carnival: Low Tax Rate Stirs Ire.   

The cruise industry enjoys a substantial tax advantage over shore-side hotels, restaurants and amusement parks by incorporating their businesses and registering their cruise ships in foreign countries. This permits the cruise lines to sell their cruises at artificially low prices.  Although Carnival and Royal Caribbean are based here in the U.S., they are registered in Panama and Liberia respectively to avoid U.S. taxes.  

Rockefeller's proposed legislation would eliminate the tax exemption for cruise lines and impose a 5 percent excise tax on gross income if passengers get on or off a ship in the U.S. The tax would be targeted to improve the transportation infrastructure.

Avoiding taxes is a cornerstone of the cruise industry's business model. Expect CLIA and the cruise lines to mount a heavy PR campaign to try and kill the new bill.  

Interested in this issue? Consider reading:

Over Past 5 Years, Carnival Paid Taxes of Only 0.6% on Billions & Billions

Cruise Lines Depend on U.S. Coast Guard for Safety & Security But Pay Nothing

Under Pressure, Carnival Agrees to Reimburse U.S. for Coast Guard & Navy Costs in Responding to Disabled Triumph & Splendor Cruise Ships

Your Tax Dollars At Sea - Who Pays When Things Go Wrong on Cruises?

Have a thought about this issue?  Leave a comment below or join the discussion on our Facebook page.

Below - watch a NBC special where Senator Rockefeller and I are interviewed about Carnival's avoidance of U.S. taxes: 



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Comments (3) Read through and enter the discussion with the form at the end
Guy - August 4, 2013 3:42 PM

IMO, CLIA and its members are just tap dancing for time until Rockefeller's term times out, and presuming, probably correctly, that this do-nothing Congress will do just that: nothing.

After 30 years in the Senate, Rockefeller has said he won't run again in 2014. Unless he can find a colleague as committed to cruise crime disclosure and taxation of U.S.-derived profits, nothing will change.

Skip - August 7, 2013 11:44 AM

I'm sure the cruise lines would rather not pay more taxes but, ultimately there will be little impact on their bottom line. They will simply raise the cost of their cruises and the passengers will bear the cost. This may prevent or discourage some people from cruising, but probably not too many.

rbowers - September 20, 2014 8:03 AM

Who in congress is supporting this industry as it fights to destroy another american and move more jobs overseas. imbelieve that they intend to repeal all of the jones act if they can . need to name these people so that their actions are exposed

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