Cruise operator stocks are sinking Thursday after a top U.S. official pledged to force them to pay taxes.
While speaking with Fox News on Wednesday evening, newly-confirmed Commerce Secretary Howard Lutnick suggested the federal government would order a crackdown on taxes paid by cruise operators.
“You ever see a cruise ship with an American flag on the back? They have flags of like, Liberia or Panama,” he asked. “None of them pay taxes. Every supertanker.”
“This is going to end under Donald Trump and those taxes are gonna be paid,” he added.
Royal Caribbean Cruises (RCL-6.64%) stock fell almost 10% on Thursday, while Norwegian Cruise Line (NCLH-4.30%) shares tumbled 7%. Carnival Corp. (CCL-4.94%) stock dropped 6%, Viking Holdings shares declined 4%, and Lindblad Expeditions (LIND-2.87%) shares fell by more than 3%.
Cruise companies have flourished in the wake of the Covid-19 pandemic, benefiting from pent-up demand for travel. Royal Caribbean last month blew past Wall Street’s estimates for its latest fiscal quarter, noting that it “continues to be encouraged by the demand and pricing environment.”
They’ve also historically benefitted from loopholes that allowed them to avoid paying corporate taxes, even while they took advantage of U.S.-funded resources. Cruise companies often choose a “flag of convenience,” meaning that they register their ships with countries that have more lenient laws, even while being headquartered in the U.S.
Royal Caribbean and Norweigian are both based in Miami, Florida, but are incorporated in Liberia and Bermuda, respectively. Carnival Corp. is also based in Miami, but is incorporated in Panama.
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