Pax Tax

While the Caribbean countries support the concept of a minimum passenger tax, a decision on enactment of such a tax has been postponed until the results of a Price Waterhouse economic impact study will be presented in March.

The tax issue recently took a dramatic turn when Royal Caribbean Cruise Line changed the Nordic Prince’s November itinerary from including St. Lucia which had planned to levy the $10 per passenger tax as of October 1 as agreed to by the Organization of Eastern Caribbean States (OECS). The Nordic Prince will instead be calling in Martinique.

“Il was a business decision,” commented Art Kane, President of the Florida Caribbean Cruise Association (FCCA). He said that costs were a factor, as well as the atmosphere in St. Lucia “which was not welcoming to cruise lines.”

Last week at the Caribbean Tourism Organization’ s (CTO) council of ministers meeting in the Bahamas, it was decided that the enactment of a $10 minimum tax as proposed by the (OECS) would be postponed at least until next spring.

Member countries also decided that they would express solidarity with any CTO member where it was clear that discriminatory action was taken by cruise lines in direct response to the CTO policy initiative to impose the minimum tax.

One cruise line executive, who asked not to be identified, told this newsletter that the (Caribbean) islands are “misinformed.” While the cruise lines used to “make millions,” he said, that is no longer the case. Now they are discounting two-for-one and can simply not afford to pay this kind of tax, he said.

As an example, the executive said that if such a $10 minimum tax had existed in 1991, RCCL would have had to pay an extra $4 to $5 million in port taxes when the cruise line only reported profits of $4.5 million.

The results of the Price Waterhouse impact study will be available to Caribbean Community (CARICOM) heads of state to review at their meeting in March.

CTO, with its 31 member states, has a much broader representation than OECS and CARICOM and therefore proposed that the group reviewing the report’s results be comprised of a broader CTO representation than CARICOM suggested.

According to a spokesperson for CTO, the statement of solidarity means that the ports intend to show moral solidarity and therefore do not want the cruise lines “to play one of us against the other.” She added that it does not mean that ports intend to lock out cruise lines which change itineraries. Kane added that it is difficult to say when a change in itinerary is discriminatory since cruise lines change itineraries annually, primarily due to marketing decisions and not port taxes.

Marketing Campaign

Other cruise related subjects discussed by CTO include the upcoming joint Caribbean marketing campaign – which includes funds from Caribbean governments, hoteliers, and cruise lines – whereby the cruise lines have collectively pledged $1.5 million. CTO agreed that it needed to “restate to cruise lines the importance of their contributing to the marketing program without the conditions” that the campaign must collect $12 million first before the cruise lines contribute their $1.5 million. In addition, CTO would still like to see the lines contribute $3 million as originally proposed.

According to Kane, $1.5 million is more in proportion with the amount that hotels are contributing, based on the overall number of Caribbean hotel beds compared to cruise berths. Kane said that even at $1.5 million, some lines would be contributing more than some of the smaller Caribbean countries. In addition, the FCCA still stands by its $12 million stipulation.

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