Cruise Industry Hearings ON C-SPAN right now.

[Ladysilver]

Cruise industry hearings on C-SPAN right now. Interesting. :cool:

[poncho1973]

http://www.c-span.org/Live-Video/C-SPAN3/

 

Link to the internet broadcast.

[poncho1973]

The most interersting thing (beyond the crime issue) was that the chairman FLAT OUT stated that later this week he is proposing to close the tax loophole the cruise lines use by flagging their ships in other countries.

 

Most everyone knew that was supposed to happen and several have been talking about it. However, Sen Rockefeller just laid it out in his closing statements. They want that fixed so the cruiselines don't pay 1% tax rates anymore.

[chengkp75]

The most interersting thing (beyond the crime issue) was that the chairman FLAT OUT stated that later this week he is proposing to close the tax loophole the cruise lines use by flagging their ships in other countries.

 

Most everyone knew that was supposed to happen and several have been talking about it. However, Sen Rockefeller just laid it out in his closing statements. They want that fixed so the cruiselines don't pay 1% tax rates anymore.

 

Missed this, would like to see something on it, can't find any link to earlier c-span. Not sure what you mean by a tax loophole for foreign flag ships, the tax loophole is for the companies being incorporated in foreign countries. As one who would dearly love to see Old Glory flying on the stern of every cruise ship based in the US (wonderful dream, won't ever happen), I don't see that the US Congress has any say over foreign flag ships.

 

Any clarification of Rockefeller's comments would be appreciated.

[SherriZ366]

The most interersting thing (beyond the crime issue) was that the chairman FLAT OUT stated that later this week he is proposing to close the tax loophole the cruise lines use by flagging their ships in other countries.

 

Most everyone knew that was supposed to happen and several have been talking about it. However, Sen Rockefeller just laid it out in his closing statements. They want that fixed so the cruiselines don't pay 1% tax rates anymore.

Rockefeller may try but he is a lame duck (not running for re-election) and it not certain he will have time and political clout to get it through Congress before fall, 2012.

[poncho1973]

Missed this, would like to see something on it, can't find any link to earlier c-span. Not sure what you mean by a tax loophole for foreign flag ships, the tax loophole is for the companies being incorporated in foreign countries. As one who would dearly love to see Old Glory flying on the stern of every cruise ship based in the US (wonderful dream, won't ever happen), I don't see that the US Congress has any say over foreign flag ships.

 

Any clarification of Rockefeller's comments would be appreciated.

 

I found this transcript online. I didn't do it myself.

 

Your companies are headquartered in the United States, most of your passengers are U.S. citizens, you use our ports, our courts and the services of the Coast Guard, and many other government agencies but because you flag your ships in other countries and maintain the fiction that you earn most of your income outside of U.S. territory, you do not pay your fair share of taxes in this country.

[chengkp75]

I found this transcript online. I didn't do it myself.

 

Thanks for that. I'm not the best at web searches. The only thing that I see that he can do is to restructure the tax code for all companies that earn income outside the US. As far as the ships being foreign flagged, I really don't see him making any headway on that, as he would either need to totally revamp the USCG regulations, grant a waiver from USCG regulations (don't see USCG sitting still for that), or telling the US cruising public that cruises will double (or more) in price.

 

I sort of find it amusing how he touts his bill as increasing safety aboard cruise ships, when all it is doing is increasing the reporting of crime statistics (not a bad thing in itself, but may feed the mistaken judgement that US laws apply to these ships). He still cannot legislate FBI jurisdiction over foreign flag ships.

[The Big Booper]

Another posturing US politician. He is one of the worst.

 

As far as American flagged cruise ships, just remember the NCLA debacle.

[DirtyDawg]

Thanks for that. I'm not the best at web searches. The only thing that I see that he can do is to restructure the tax code for all companies that earn income outside the US. As far as the ships being foreign flagged, I really don't see him making any headway on that, as he would either need to totally revamp the USCG regulations, grant a waiver from USCG regulations (don't see USCG sitting still for that), or telling the US cruising public that cruises will double (or more) in price.

 

I sort of find it amusing how he touts his bill as increasing safety aboard cruise ships, when all it is doing is increasing the reporting of crime statistics (not a bad thing in itself, but may feed the mistaken judgement that US laws apply to these ships). He still cannot legislate FBI jurisdiction over foreign flag ships.

 

Any price increase would be a lot less than double. The industry's pretax and after tax margin on revenue is about 12%. If the government institutes a 35% income tax rate, the industry would need to increase pretax margin to 18.5% to cover the tax (18.5% X (1-.35) = 12%). So prices industry wide would need to go up 6.5% (assuming all other costs stay the same) in order for the industry it have the same after tax margin.

 

So in the end the cruising public will have to pay more :(, but not a lot more.:D

[chengkp75]

Any price increase would be a lot less than double. The industry's pretax and after tax margin on revenue is about 12%. If the government institutes a 35% income tax rate, the industry would need to increase pretax margin to 18.5% to cover the tax (18.5% X (1-.35) = 12%). So prices industry wide would need to go up 6.5% (assuming all other costs stay the same) in order for the industry it have the same after tax margin.

 

So in the end the cruising public will have to pay more :(, but not a lot more.:D

 

That's because you are talking about ensuring the industry pays its fair share of taxes. When I spoke about prices doubling, I was talking about having all cruise ships be US flag.

[orville99]

Any price increase would be a lot less than double. The industry's pretax and after tax margin on revenue is about 12%. If the government institutes a 35% income tax rate, the industry would need to increase pretax margin to 18.5% to cover the tax (18.5% X (1-.35) = 12%). So prices industry wide would need to go up 6.5% (assuming all other costs stay the same) in order for the industry it have the same after tax margin.

 

So in the end the cruising public will have to pay more :(, but not a lot more.:D

 

 

Unfortunately, tax math doesn't work like that. An increase in price increases revenue which increases net margin, which increases tax liability, so every dollar in incremental revenue (in your scenario of all other costs staying content) would incur a marginal tax rate increase of the full 35%.

 

However, its a moot point, since U.S. tax law only applies to U.S. corporations, and all of the major cruise lines are foreign corporations. Not only would U.S. law have to change, but the entire GATT agreement would have to be scrapped and renegotiated.

[DirtyDawg]

Unfortunately, tax math doesn't work like that. An increase in price increases revenue which increases net margin, which increases tax liability, so every dollar in incremental revenue (in your scenario of all other costs staying content) would incur a marginal tax rate increase of the full 35%.

 

However, its a moot point, since U.S. tax law only applies to U.S. corporations, and all of the major cruise lines are foreign corporations. Not only would U.S. law have to change, but the entire GATT agreement would have to be scrapped and renegotiated.

 

In my example the industry for every $100 the industry currently generates in revenue it has $88 in costs which leaves $12 in pretax income. Currently the industry pays very little income tax so effectively it also generates $12 in after tax income. If the Government wants the industry to pay income taxes of say 35% on pretax income it will need to increase prices to cover that additional tax. If the industry increased revenue by 6.5% to $106.5. Then subtract the costs ($88) leaves a pretax profit of $18.5. 35% of $18.5 is $6.5 in tax - leaving $12 for the industry after tax.

 

Now, just like other foreign corporations operating in the U.S. the industry might have to incorporate a U.S. subsidiary and those subs would pay U.S. tax on their pretax income. That's where the fun and games will come in - deciding which assets, which revenue and which costs are U.S. and which belong to the foreign operations. Sure, it would be messy, but when governments are cash strapped they find ways of squeezing extra cash anywhere they can. ;)

[SherriZ366]

Another posturing US politician. He is one of the worst.

 

As far as American flagged cruise ships, just remember the NCLA debacle.

Agree on Rockefeller. And remember and agree on the NCLA debacle.

[SherriZ366]

Rockefeller may try but he is a lame duck (not running for re-election) and it not certain he will have time and political clout to get it through Congress before fall, 2012.

Also in the next Congress, it's likely that Bill Nelson from Florida will chair the Committee if the Democrats keep control of the Senate. He would be more interested in protecting the cruise lines that are homeported in 5 FL cities, where provisioning and pre-stays really add to the economy. Port Canaveral and Key West are also destinations for cruise ships. I haven't had a chance to watch the hearings but I imagine that John Thune would not be that interested in taxing the cruise industry. He is likely to Chair the Committee if the Republicans win the Senate. So a post-Rockefeller Commerce Committee would be better for the cruise industry.