US senate to consider taxing the cruise lines

After a period during which the reputation of cruise ships have been tarnished by events including the sinking of the Costa Concordia, a fire on the Royal Norwegian’s Grandeur of the Seas off the Bahamas, alarming reports in the US media about onboard incidents, and criticism of the industry’s legal but aggressive tax avoidance measures, the cruise lines now face a new form of censure.

In the US, Senator Jay Rockefeller has introduced legislation seeking to eliminate the tax exemption that the cruise industry enjoys. His bill aims to tackle the minimal levels of US tax the industry pays by registering their vessels in Panama and Liberia.

The Senator’s proposed legislation would eliminate the tax exemption for cruise lines and impose a five per cent excise tax on gross income if passengers get on or off a ship in the US.

Senator Rockefeller, as Chairman of the Senate Commerce Committee, is also engaged in another battle with the cruise lines through legislation that aims to improve consumer protection for cruise passengers and close gaps in cruise reporting requirements relating to passenger safety and security.

How far the legislation gets remains to be seen, as an army of lobbyists have begun work to halt the bills. For its part, the Cruise Lines International Association has responded by releasing details of what it and its members are doing to be more proactive, and individual lines have begun to publish details of shipboard incidents and are agreeing to meet the costs of the US coastguard and other emergency services following at-sea incidents.

These are all issues that the Caribbean tourism industry should be following closely as, like it or not, the cruise industry has become of great economic importance to the Caribbean despite a still pervasive sense that it uses the region and leaves little behind.

Since the economic downturn began in 2007/8 cruise tourism has experienced a significant growth in popularity, in part because cruise vacation is seen as offering value for money in a manner only otherwise available through all-inclusive hotels and vacations. At the same time, cruises are bringing to the region new visitors in a more diverse range of socio economic categories, including younger visitors and multigenerational family groups.

As a consequence the Caribbean is set to continue as the dominant cruise destination in the world, and retain the leading share of cruise industry capacity. Industry statistics suggest that in 2013 the region will account for around 37 per cent of all global cruise itineraries and receive on average a spend of around US$96 per passenger and crew member or US$225,596 per typical cruise ship port-of-call.

While these sums and the taxes paid by cruise ship passengers are minimal in comparison to what travellers who chose to be land based spend, the reality is that hundreds of thousands of visitors are gaining their first impressions of the Caribbean from one-day stops on board cruise ships.

Taxation apart, the challenge for the region is to develop programmes such as those in the Dominican Republic that actively try to convert cruise visitors to taking a future vacation on land, and to attract the cruise lines to home port in the Caribbean.

Although the cruise companies sometimes seem to be their own worst enemies by being less than transparent or forthcoming, it is time for a better relationship between land and cruise based tourism, and to find new ways to capitalise on the numbers of visitors they bring.