Analyst: New Tax Bill Could Hit Cruise Industry

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A prominent cruise industry analyst estimates that a proposal in the new tax bill currently moving through Congress would impact the cruise industry.

According to a note from Robin Farley, an analyst with UBS Investment Research, the bill includes a proposed tax generated from the cruise lines of approximately 70 million per year. Based on days in U.S. waters, roughly less than 11 percent of Carnival Corporation’s cruise days, 12 percent of Royal Caribbean Cruises Ltd.’s cruise days and 13 percent of Norwegian Cruise Lines Holdings’ cruise days would be taxable. At a tax rate of 20 percent, that would work out to around a 2 percent effective tax rate.

“If this were passed into law, the cruise lines could respond by training to alter some departure points, though it would be difficult to change that meaningfully, in our view,” Farley said. Farley also noted that cruise lines could pursue the UK tonnage tax regime, which is based on a ship’s weight to try to mitigate the impact of the new tax, although a 2 percent effective tax rate may work out to be less than that.

“Actual legislative text has not been made available so it would be premature to speculate at this time,” a representative of Cruise Lines International Association (CLIA) tells Travel Agent. “However, we are engaged with key policy makers to ensure a vibrant business environment for the cruise industry.”

The UBS Washington policy expert gives the provision a 50 percent chance of surviving in some shape into the final tax legislation, Farley said. The bill could be finalized before the end of the year, and the Senate bill could move to the Senate floor for full consideration after Thanksgiving.

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