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Arthur Frommer Comments on Lack of US Income Taxes paid by Cruise Ship Companies

Brett Rivkind
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Brett Rivkind
March 14, 2012 9:18 AM
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I have recently been writing about Congressional Hearings addressing the Costa Concordia disaster, as well as other issues that have come to the attention of Congress as a result of the increased scrutiny of the cruise line industry. One of those issues that has come to light, despite the fact that it has been present for many years, is the fact that the major cruise ship companies that earn billions of dollars in revenues each year carrying millions of United States passengers, as well as utilizing United States ports and governmental services, do not pay United States income taxes on their profits.

Arthur Frommer, founder of the popular Frommer travel guides, has an interesting post about the lack of income taxes paid by the major cruise ship companies, such as Carnival Cruise Lines, Royal Caribbean Cruise Lines, and Norwegian Cruise Lines. He points out that Senator Rockefeller confronted a representative of the Cruise Line International Association with the fact that these American based companies, including Royal Caribbean Cruise Lines, Regent, Seabourn, Oceania, Silver Sea, Carnival, and NCL, do not pay U.S. income taxes on their profits. This is despite the fact that the American based cruise ship companies were reported to have earned upwards of $25 billion in profits. Frommer points out that Rockefeller stated he was going to subpoena the Cruise Line International Association to demand that they provide the United States Senate with their most recent federal tax returns.

Many years ago I was involved in fighting legislation the cruise ship industry tried to pass to amend the Jones Act, a federal statute that protects seamen by providing them with a negligence action against their employer. The amendment the cruise line industry sought was to deny foreign seamen the rights to bring a Jones Act claim against a cruise ship company if the seaman was a foreign citizen. This would have essentially done away with the Jones Act with respect to the cruise ship industry as most of their crew is hired from third world countries.

As pointed out in the article by Frommer, the cruise ship companies fly what’s called flags of convenience, which means they register their vessels in a foreign jurisdiction (such as Liberia, Panama, the Bahamas) which is simply a formality design to avoid payment of American taxes and certain American labor laws. The Jones Act remains the only weapon a foreign crewmember has against his employer when he suffers injury or death in the course of his employment. Just as the cruise ship industry has lobbied heavily to make sure that they enjoy favorable laws with respect to claims filed by passengers, including claims for wrongful death under the Death on the High Seas Act, the cruise ship industry spent a lot of money to try to do away with the rights of the very valuable crewmembers that allow them to make the billions of dollars of profits they make each year.

The cruise ship industry not only tries to avoid being regulated by the United States government, it succeeds in avoiding payment of United States taxes, avoid abiding by United States labor laws, and has succeeded in enjoying favorable laws with respect to personal injury and wrongful death claims brought against them by the millions of passengers that sail on cruise ships each year.

The push to amend the Jones Act to deprive foreign seamen of claims under the Jones Act was unsuccessful the last time the cruise ship industry attempted to do this. One of the main issues that stopped them in their tracks was the argument that they should be required to pay United States income taxes. This seemed to scare them away from their position at that time.

However, the cruise ship industry did not give up on trying to deny seamen their rights. The cruise ship companies started inserting mandatory arbitration agreements in seamen’s employment agreements, requiring them to arbitrate their claims in a foreign jurisdiction. They have now included choice-of-law provisions dictating the application of foreign law, not the Jones Act. This powerful cruise ship industry will not stop until they can maximize the limitations on their liabilities for damages for personal injury and wrongful deaths to both passengers and crewmembers.

The Costa Concordia is going to be a reminder to all about all of these favorable laws and limitations the cruise ship companies enjoy. I hope that our Congress is strong enough to overcome the strong lobbying efforts the cruise ship industry and make sure that some of these archaic and unjust laws are changed for the benefit of passengers and crewmembers across the world.

I was privileged to be invited as a speaker at the prior Congressional Hearings addressing cruise ship safety issues. I was able to share my almost thirty years experience as a maritime lawyer with Congress. I was somewhat surprised to learn that many of these issues that are now surfacing about the cruise ship industry was not known to our Congress. With the many disappearances reported on cruise ships, as well as the reported sexual assaults and rapes onboard cruise ships, Congress has now become much more aware of the many problems with respect to the cruise ship industry and the need for reform.

Our firm will continue to fight for appropriate maritime laws governing the cruise ship company’s liability for personal injury and wrongful death claims.

Our Miami based firm handles all types of personal injury and wrongful death claims arising out of accidents involving cruise ships, pleasure boats, tugboats, barges, and personal watercraft.

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