One of the little know facts about the cruise industry is that it pays virtually no U.S. 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.  That’s why Carnival is incorporated in Panama, Royal Caribbean is incorporated in Liberia, and Princess Cruises is incorporated in Bermuda. 

The New York Times covered the issue of cruise line taxes today:

"The Carnival Corporation wouldn’t have much of a business without help from various branches of the government.  The United States Coast Guard keeps the seas safe for Carnival’s cruise ships. Customs officers make it possible for Carnival cruises to travel to other countries.  State and local governments have built roads and bridges leading up to the ports where Carnival’s ships dock.  

Mickey Arison - Carnival Cruise - No TaxesBut Carnival’s biggest government benefit of all may be the price it pays for many of those services.  Over the last five years, the company has paid total corporate taxes — federal, state, local and foreign — equal to only 1.1 percent of its cumulative $11.3 billion in profits.  Thanks to an obscure loophole in the tax code, Carnival can legally avoid most taxes."

I have written about the cruise industry’s ability to avoid U.S. taxes since starting this blog.

Carnival was created by Ted Arison (father of current CEO Mickey Arison, photo right).  Senior Arison collected billions of dollars from tax paying U.S. passengers and lived the good life in Miami.  But he registered his Miami-based cruise line and his cruise ships in Panama to avoid U.S. taxes.  In 1990, he abandoned Miami, denounced his U.S. citizenship, and returned to Israel with his billions in a ploy to avoid estate and inheritance taxes.

Whenever I think of cruise tycoons like the Arisons and the foreign cruise lines like Carnival and Royal Caribbean, I can’t help but think what a scam they are running.    

The Miami-based cruise lines file papers of incorporation and vessel registration in distant countries where no one will bother them with things like income tax, wage and labor laws, or safety regulations. They then collect billions of dollars a year from hard working saps – the U.S. tax paying public. 

 

Like this article?  Consider reading: 

Cruise Line Fat Cat Billionaires 

What the Cruise Industry Has to Learn From My Cousins Back in Arkansas

 

Credits: Mickey Arison – David Adame AP (via Cruise Blog)