Service Charge Breakdown

[CRUISEVIEW]

I came across an article about this subject that includes a list of the various cruise lines and their gratuity policies. Here's the link: https://www.usatoday.com/story/travel/cruises/2017/04/03/cruise-ship-gratuities-service-charges/99820420/

 

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[BunnieBear]

That's not how the world works. There will always be fees that are not included in the advertised price. Tax is an example of one of these things.

 

 

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That's not the way YOUR part of the world works. Here it is included. If something is priced up at £100 it's already got the tax included and that is all you pay.

 

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[NLH Arizona]

That's not the way YOUR part of the world works. Here it is included. If something is priced up at £100 it's already got the tax included and that is all you pay.

 

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Many differences and just shows us how we should do research, so we will know how things are done differently and what to do in countries other than our own.

[luvtheships]

Taxable income for who? The company? NCL doesn't pay US federal taxes on 90% of its operations. The crew? I know that in the Philippines, at least, taxable income is defined as "any compensation received from the employer, whether called wages, salary, or gratuity". The only money that is handled differently is money received directly from a customer.

 

 

 

You are agreeing with me but don't realize it

 

Bottom line if ncl didn't call it crew incentive funded by pax dsc....then ncl must record it as revenue....on their books...just like they record my cruise payment

 

 

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[luvtheships]

That's your perogative but if they would otherwise have received a share of the DSC you'd be causing them to come away with less earnings than expected.

 

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Again....it's if no consequence to me as these jobs are not normally tipped. Do you tip the guy who dry cleans your clothes?

 

Do you tip your electrical utilities worker when they are working on your street?

 

 

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[BunnieBear]

Many differences and just shows us how we should do research, so we will know how things are done differently and what to do in countries other than our own.

We buy from the UK wing of the operation remember.

 

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[BunnieBear]

Again....it's if no consequence to me as these jobs are not normally tipped. Do you tip the guy who dry cleans your clothes?

 

Do you tip your electrical utilities worker when they are working on your street?

 

 

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I don't dry clean but road workers get a full wage and don't rely on a share of the tips pool to top up a very low basic salary. I hate the out-of-sight-out-of-mind attitude that just tipping your room steward and waiter creates. If the DSC system didn't exist then it wouldn't matter so much, because then the back room staff would require a full fair wage from the cruise line to reflect the lack of additional earning potential, but that not being the case why remove their share in order to give it directly to the people you face? Those people are already in line for additional tips on top of their DSC in any case. I'm just answering your question of why it bothers people, not arguing with you.

 

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[luvtheships]

I don't dry clean but road workers get a full wage and don't rely on a share of the tips pool to top up a very low basic salary. I hate the out-of-sight-out-of-mind attitude that just tipping your room steward and waiter creates. If the DSC system didn't exist then it wouldn't matter so much, because then the back room staff would require a full fair wage from the cruise line to reflect the lack of additional earning potential, but that not being the case why remove their share in order to give it directly to the people you face? Those people are already in line for additional tips on top of their DSC in any case. I'm just answering your question of why it bothers people, not arguing with you.

 

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I think it bothers people because they don't trust the cruiseline to tip out in cash those back of the house workers

 

The guy doing the laundry is getting his contracted salary regardless of wether I remove dsc

 

He is also partaking in "incentives" like crew parties etc that ncl provides

 

The only way any crew member is getting extra is by me filling out a comment card in a positive way and naming an individual

 

Saying the dishes were clean in the mdr

 

Or

 

The towels were fluffy in my cabin

 

Isn't getting anyone in the kitchen or laundry any extra cash in pocket

 

 

 

 

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[chengkp75]

You are agreeing with me but don't realize it

 

Bottom line if ncl didn't call it crew incentive funded by pax dsc....then ncl must record it as revenue....on their books...just like they record my cruise payment

 

 

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Having sat in on my share of onboard revenue meetings (every week), I can tell you that regardless of what you decide to call it, the DSC is a reportable onboard revenue stream.

[Moby0215]

That's not the way YOUR part of the world works. Here it is included. If something is priced up at £100 it's already got the tax included and that is all you pay.

 

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Yes I should have clarified in the US.

 

 

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[fshagan]

You are agreeing with me but don't realize it

 

Bottom line if ncl didn't call it crew incentive funded by pax dsc....then ncl must record it as revenue....on their books...just like they record my cruise payment

 

1. Cruise Lines do not pay corporate income tax on shipboard revenue. They are exempt under 26 CFR 1.883-1. This is listed in the annual report of all the public cruise lines (Carnival, RCCI, and NLCH) in the "Risks" section (because the government could change the law and subject them to income tax).
   
2. Organizations that do pay tax do not pay income tax based on revenue. They pay income tax based on what we call "profit"
   
3. There is no difference for income taxes for NCL to call the distribution to the crew "wages", "tips", or "gratuities". All three are in the category of "costs" and reduce the revenue, thereby reducing the profit. If they paid income taxes, it wouldn't matter. It really doesn't matter since they don't pay taxes.
   
4. Income taxes for the crew are based on their home country's rules. My understanding is that Americans pay income tax on all income earned worldwide, while subjects in the UK do not pay any income tax on foreign earned income (a great benefit to the UK employees). Filipinos do not pay income tax on tips, but do on regular wages.
   

So the only benefit, other than marketing, is to some of the employees who may have a different tax treatment between "wages" and "tips".

 

 

The main benefit is to obscure the real price of the cruise, forcing you to use a lot of math to figure out if RCL is better than NCL (fare x 2 + (# days * 13.99) + (.18 * Retail value of perk) + taxes + fees)

[luvtheships]

Well then if the real purpose is to obscure the price of the cruise then all the more reason to remove it since it is a cruise price marketing ploy as you say. If that's true and it's all about the cruise price then ncl really doesn't care if I tip extra or not

 

Since it is discretionary then I will continue to use my discretion in tipping....because ncl allows that.

 

If however it is about rewarding the crew then your argument is void...because then it's not about cruise pricing at all

 

It's either...

 

A reward for crew

 

Or

 

A marketing ploy

 

Can't have it both ways but since you say it's a marketing ploy then no one here should be upset if pax choose to remove it

 

Btw ncl didn't object when I removed it on my last cruise. It took 6 weeks but I got a credit to my Visa card

 

 

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[luvtheships]

Having sat in on my share of onboard revenue meetings (every week), I can tell you that regardless of what you decide to call it, the DSC is a reportable onboard revenue stream.

 

Reportable how? To the head of sales? To the marketing director?

 

Or

 

On the corporate tax return?

 

Remember they do business out of Miami which is in the USA

 

 

Ftlog there is a reason it's discretionary and a reason it's a separate charge to the pax

 

And the reason is fully for the benefit of ncl

 

Please do not kid yourself here

 

 

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[BermudaBound2014]

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[fshagan]

Well then if the real purpose is to obscure the price of the cruise then all the more reason to remove it since it is a cruise price marketing ploy as you say. If that's true and it's all about the cruise price then ncl really doesn't care if I tip extra or not

 

NCL allows you to remove the daily service charge, so I'm not sure why are you are so concerned about defending your actions. If you're OK with it that's all that matters. You aren't breaking any rules. Neither Leviticus nor Romans addresses the issue. I trust that you will do what you think is right, and I will do the same. I will give your opinion on my actions exactly the same amount of weight that you should give my opinion of your actions: exactly zero.

 

The option is being removed for UK passengers who all have to pay a set amount now. Before, they could exercise discretion over a tiny percentage of their total cruise cost. They seem to want the simplicity over the complexity, and I totally understand that. Me too.

 

I think more transparent pricing would be a good thing for consumers. Include the total for the entire party, including taxes and fees, when you are searching for a cruise. No more "From $579 (double occupancy)" pricing ... just say "$1,362, including port fees and taxes". You wouldn't have to click through three or four screens to get to the true price of the cruise. No more advertising a price that is "sold out" when you get to the cabin selection. I think NCL is actually moving in that direction with the "all inclusive" model for the UK and some other limited places.

[fshagan]

Reportable how? To the head of sales? To the marketing director?

 

Or

 

On the corporate tax return?

 

Remember they do business out of Miami which is in the USA

 

 

Ftlog there is a reason it's discretionary and a reason it's a separate charge to the pax

 

And the reason is fully for the benefit of ncl

 

Please do not kid yourself here

 

You are entitled to your own opinion, but not your own facts. NCL does not pay corporate income tax. No American based cruise line sailing ships of a foreign flag pays income tax on any shipboard revenue, including our fares, fees, etc. There have been attempts to change this, most recently in 2013. But so far, the traditional exemption has held for all cruise lines.

 

I believe the ships are run as their own separate "company", or like a division of a land-based company. The department heads are responsible for income and costs of their departments. Every penny you spend, at any point on the ship, is counted toward a department, and the head of that department probably sees the numbers every day. I'm sure the daily service charge is included in that, and I would imagine the hotel director knows how much revenue is coming in daily from the charge. His career depends on maintaining the revenue stream and controlling costs. I believe this is what chengkp75, an experienced NCL department head, is referring to. Declining revenues have to be addressed some way, including reducing the amount of money available for employee benefits, team building exercises, and bonuses. Or number of employees. Every single company I have worked for do things exactly that way. I have made those tough decisions about cutting staff, reducing "extras", and controlling costs.

[chengkp75]

The above post is absolutely accurate. The Captain of a cruise ship is far more the CEO of a small corporation than a traditional sea captain. The ship reports their "net profit" (revenue minus costs) to corporate as a measure of how the ship is doing business-wise. Each department head is responsible for maximizing revenue and minimizing cost, and the DSC is one line item of the Hotel Director's revenue stream. While my department was not involved in DSC, the reasons for its reduction by passengers was often directed at my department's operations (water leaks, blocked toilets), so we had to be intimately aware of how much DSC was lost every week, and why.

 

And the one who is kidding themselves is anyone who believes that just because a company has a headquarters in the US that they pay US corporate taxes. The only corporate taxes that NCL pays to the US is for the operation of the corporate headquarters itself, and the one US flag cruise ship, the POA, but not for any revenue generated by any other ship in the fleet, as fshagen linked to the appropriate USC a few posts back. Even true US corporations like Microsoft and Apple do not pay US corporate tax on any operation outside the US.

 

People think that because the cruise lines are headquartered in the US that they are "US companies" and follow all US laws. NCL is incorporated in Bermuda, under Bermudan law, and their ships fly the flag of the Bahamas, and hence follow Bahamian law.

[Scatterbrain42]

.. removed . I think NCL is actually moving in that direction with the "all inclusive" model for the UK and some other limited places.

 

I think the list is now about 30 countries and covers about 400M people so not that limited anymore :)

 

My next one (oct) is under the new program.

 

Daniel.

[Scatterbrain42]

. Even true US corporations like Microsoft and Apple do not pay US corporate tax on any operation outside the US.

 

And in some ways this (tricks excluded) makes sense since apple and NCL probably too make more money, have more people, use more infrastructure outside of the US it makes perfect sense each of the countries create/has some tax rules so apply to the company using their resources to pax taxes for the common costs.

 

Daniel.

[fshagan]

And in some ways this (tricks excluded) makes sense since apple and NCL probably too make more money, have more people, use more infrastructure outside of the US it makes perfect sense each of the countries create/has some tax rules so apply to the company using their resources to pax taxes for the common costs.

 

Not to get too deep into the woods of tax law on this one, but one of the unique features of the American tax system is that everyone is taxed on their earnings world-wide, including overseas income. American companies have been establishing headquarters in other countries and making the American firm a subsidiary to avoid taxes on income earned in other countries. An American company, Burger King, purchased Canadian doughnut chain Tim Horton's with the intention of doing just that, but public pressure made them withdraw (they may have done it by now; I don't know). Our high corporate tax rate makes this tactic profitable.

 

But, NCL doesn't pay US income taxes on any shipboard revenue. They probably pay more UK income / corporate tax than they do US tax, as my understanding is that cruise lines have to pay UK taxes on profit from operations beginning and ending in the UK.

[chengkp75]

Not to get too deep into the woods of tax law on this one, but one of the unique features of the American tax system is that everyone is taxed on their earnings world-wide, including overseas income. American companies have been establishing headquarters in other countries and making the American firm a subsidiary to avoid taxes on income earned in other countries. An American company, Burger King, purchased Canadian doughnut chain Tim Horton's with the intention of doing just that, but public pressure made them withdraw (they may have done it by now; I don't know). Our high corporate tax rate makes this tactic profitable.

 

But, NCL doesn't pay US income taxes on any shipboard revenue. They probably pay more UK income / corporate tax than they do US tax, as my understanding is that cruise lines have to pay UK taxes on profit from operations beginning and ending in the UK.

 

This is why most mult-national corporations will not bring profits from overseas subsidiaries back to the US for investment in the US, because it then becomes taxable in the US.

[AndyCapn]

Income taxes for the crew are based on their home country's rules. My understanding is that Americans pay income tax on all income earned worldwide, while subjects in the UK do not pay any income tax on foreign earned income (a great benefit to the UK employees).

 

 

Not entirely true. American citizens are subject to American income tax on all worldwide income regardless of where they live in the world. The UK (and, in fact most, countries) only subject you to tax on worldwide income if you are a resident of the country, regardless of your citizenship.

 

Generally speaking, residency is based on where you normally reside. And for most tax administrations (including the UK) for tax purposes you must be a resident somewhere. In other words, even though you live on a cruise ship in international waters, what would your country of residence be without that job?

 

It's a trick that job recruiters for cruises used to use in Canada (and I assume elsewhere) where they convince young adults that the wages may be low on a cruise ship but that's okay because it's tax free! It's true there won't be any withholding taxes, but unless you've established residential ties with another country, you're still considered a Canadian resident and, as such, subject to tax in Canada on your worldwide income.

[Smacciemac]

I got added the "extra service charge" for adding the Drink Package" that had to be paid with my fare. Was that was for server gratuities? Will I also get the regular gratuities added to my room?

 

 

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[chengkp75]

If you are a US citizen residing abroad, and you are subject to income tax in the country of your residence, you are allowed to take this tax amount as a credit (not a deduction) against US taxes owed. I was once living in the US, but working on oil rigs in Atlantic Canada. Canada didn't want expats working the oil fields, so they decided to tax the non-residents as if we were residents. And then they decided that since the company paid any foreign taxes accrued for the employee, that this amount of tax was also income to the employee, so it needed to be taxed the next year, so you had tax on tax. They decided that this compounding of the taxes would go on for 7 years, so the company ended up paying about 75% of our income as Canadian taxes. While this was added to my gross income on the US tax form, since the taxes were a credit, not a deduction, it resulted in much reduced US taxes (some years not paying any, and then carrying over credits to future years for 3 years or so).

[Quilting_Cruiser]

I got added the "extra service charge" for adding the Drink Package" that had to be paid with my fare. Was that was for server gratuities? Will I also get the regular gratuities added to my room?

 

 

You made it through all the tax talk to actually ask a question! ;) The service charge is for the UBP, and some will say it's just a service charge and some will say it's gratuities. Theoretically, it goes into a pool for the bar staff, but who knows. Bottom line is that most people seem to believe it's tips and there's no need to tip your bartender or bar waiter further (though a tip now and then goes a long way!). Yes, the DSC will be added to your onboard account.