Fears for US cruise industry jobs after threat of higher taxes

Following thousands of job redundancies in the US federal aviation sector, there are now fears for more American travel and tourism jobs, this time in the commercial cruise industry. The concerns come following remarks by President Donald Trump’s Commerce Secretary, who suggested cruise lines should pay more taxes, prompting an immediate slump in cruise company share prices.

Secretary Howard Lutnick, a multi-millionaire stockbroker who attracted controversy after not honouring pay checks to employees killed in the 2001 World Trade Center attacks, incorrectly told Fox News last week that no cruise company pays any taxes in the US.

Lutnick wrong, cruise trade body says

“You ever see a cruise ship with an American flag on the back?” Lutnick asked. “None of them pay taxes … every supertanker. None pay taxes … all foreign alcohol. No taxes. This is going to end under Donald Trump.”

His words were rebuffed by cruise trade bodies. Despite certain income tax exemptions and reciprocal foreign port arrangements that promote consistency among international shipping firms, cruise operators do pay payroll taxes, port fees and other costs, Travel Weekly notes. In fact, cruise companies pay the majority of their taxes in the US.

“Cruise lines pay substantial taxes and fees in the U.S.— to the tune of nearly $2.5 billion, which represents 65% of the total taxes cruise lines pay worldwide, even though only a very small percentage of operations occur in U.S. waters,” said the Cruise Lines International Association, in a press release.

Analysts predict higher taxes would lead to job losses

Even though Lutnick’s accusation of the cruise industry was false, the suggestion that the Trump administration could hike cruise company taxes or port fees led to noticeable market instability. In the wake of his words, Royal Caribbean saw 7.6% wiped off share prices, Carnival shares fell by 5.9%, Norwegian Cruise Line dropped 4.9% and Viking Holdings lost 3%.

Analysts described the market response as a “knee-jerk over-reaction” and recommended investors snap up shares in what appears to be a growth area while they are cheap. Stifel Financial, reported by CNBC, pointed out that the US fiscal regime for the entire cargo sector would likely have to be overhauled to make cruise companies pay more.

If those regulatory changes were to happen, Stifel predicted US jobs could be lost as a result. This is because cruise lines and cargo would simply take their corporate headquarters and employment manifest elsewhere. “With 90%+ of their business being conducted in international waters, it would then be impossible for the U.S. (or any other entity) to target the cruise operators,” the investment firm said.