Have you ever ever seen a US-flagged cruise ship? Likelihood is, you in all probability haven’t – however this might all be altering quickly.
On February 19, 2025, US Commerce Secretary Howard Lutnick advised throughout a Fox Information interview that President Donald Trump plans to abolish the Inner Income Service (IRS) – and as an alternative make outsiders pay, together with even calling out cruise strains.
“You ever see a cruise ship with an American flag on the again?” Lutnick identified.
Widespread flag etiquette is to fly the flag of each nation a cruise ship visits – however most don’t fly the American flag because it comes with a excessive value.
Sometimes, a ship’s “flag of comfort” – which is the place the ship is registered – is in a rustic with higher legal guidelines and decrease taxes than the US.
Additionally, crew members on US-flagged vessels should pay US federal taxes – plus, there are strict necessities stating that almost all of the employees have to be residents.
Lutnick added, “None of them pay taxes … each supertanker. None pay taxes … all international alcohol. No taxes. That is going to finish below Donald Trump.”
Value Studying: What’s the Passenger Vessel Companies Act and How Does it Influence Cruises?
Within the wake of this remark, cruise shares took fairly the hit because the market opened Thursday.
Carnival Cruise Line’s shares took the smallest hit all through the day, dropping solely about 5%. Royal Caribbean dropped virtually 9.3% early on, however ended the day down 7%.
Norwegian Cruise Line and Viking Cruises had been additionally each affected, each dropping as a lot as 7%.
Most specialists are saying there was an enormous overreaction to the remark made by Lutnick – a lot so they might advise it as an excellent shopping for alternative for traders.
The cruise business has been booming because the finish of the COVID-19 pandemic – because the lifting of mass quarantines introduced a rise within the demand for journey.
Shares have been on the rise since 2022 – Royal Caribbean’s up virtually 400% – and Carnival Cruise Line’s up 205%.
These cruise strains have headquarters in Florida – however are additionally included in different international locations corresponding to Liberia and Panama – permitting them to be exempt from paying taxes on US-sourced revenue.
President Trump desires to vary this, however thus far, no additional plans have been shared publicly. There are lots of choices for cruise strains shifting ahead to stay unaffected by the advised tax enhance.
How you can Keep away from Cruise Taxes
By now, it’s possible you’ll be questioning in case your cruises are about to value extra. I’ve some excellent news – there’s a superb likelihood this received’t occur.
A workforce of analysts led by leisure business skilled Steven Wieczynski shared some reassuring data – citing that it’s in regards to the tenth time previously 15 years a politician talked about altering the tax construction within the cruise business.
Additionally they famous that each time it has been talked about, it has by no means made it very far.
Most enterprise performed on cruise ships occurs in worldwide waters, making it practically not possible for any nation to actually goal the cruise strains straight.
When new taxes are imposed by international locations, the fee often falls on the passenger.
In order that implies that any passenger on a US-flagged – together with US residents – would really should pay extra for his or her cruise fare. Discuss a lose-lose scenario!
At the moment, the one cruise ship that’s US-flagged and registered within the nation is Satisfaction of America, operated by Norwegian Cruise Line. There are additionally varied smaller strains that cater to lakes and rivers throughout the US.
Learn Additionally: Mexico Decides to Delay New Cruise Tax Charge
Cruise strains really pay a big quantity of taxes and costs within the US – practically $2.5 billion yearly, which is about 65% of the full taxes that cruise strains pay worldwide.
The query stays on why the US authorities would make a remark that might drive the business away – as cruise strains can transfer their headquarters and take jobs elsewhere if want be.
If it turned required for cruise strains to have US-flagged ships or pay taxes primarily based on their headquarters places, then there is perhaps some pricing modifications. Till then, it’s clean crusing.
