Amazingly Carnival Cruise Lines Pays Only 1.1 Percent of 11.3 Billion Dollars in Profits

By Brett Rivkind, Esquire on February 2, 2011 3:49 PM |

We have all heard the term "loopholes", but the tax loopholes Carnival Cruise Lines has taken advantage of give new meaning to the word. Everyone knows the huge presence Carnival Cruise Lines has in the United States, and the benefits it reaps from services they receive in the United States. This would include airlines, roads, security protection, custom officers, Coast Guard protection and other governmental services.

It was recently reported that over the past five years, Carnival Cruise Lines paid total corporate taxes which would include Federal, State and Local and Foreign, an amount equal to only 1.1 percent of the 11.3 Billion Dollars in profits it had earned. Carnival is able to legally avoid most taxes.

The article in the New York Times reported the United States has the worst corporate tax code in the world. The official tax rates are higher than most other countries.

Why is Carnival able to pay so little in taxes? The explanation was that there is a provision which lets some shipping companies legally operate overseas. In the case of Carnival Cruise Lines they incorporate in Panama, enabling them to avoid taxes. This is despite the fact that their executives sit in plush offices in Miami, and millions of passengers are boarding their profit making ships on a daily basis daily here in the United States.

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Why does Carnival choose Panama? There are very favorable laws in Panama for corporations such as Carnival, resulting in Carnival paying very little money in any type of type of taxes. At the same time a big corporation like Carnival is able to earn billions of dollars from their passenger cruise ship business, largely from United States passengers, Carnival Cruise Line is part of a huge lobbying effort to restrict rights of both passengers and crewmembers injured aboard their ships. Yes, that is true. On the one hand they are reaping the huge benefits and advantages of being able to operate their business here in the United States, while paying minimal taxes, earning billions of dollars, and at the same time using their profits to lobby Congress to pass favorable laws for the cruise ship industry. This lobbying effort includes efforts to prevent amendments to the outdated and archaic Death on the High Seas Act, which severely limits the damages available to family members who have lost loved ones aboard a cruise ship due to the negligence of the cruise ship company.

Many years ago my wrongful death firm participated in efforts to defeat attempted legislation by the cruise line company to severely restrict the rights of crewmembers to work aboard the cruise ships. The cruise ship lobbyist attempted to introduce legislation into an obscure piece of legislation that was not associated with the legal rights available to crewmembers injured onboard cruise ships. Despite the Jones Act being enacted in 1920 to protect crewmembers, the cruise lines attempted to place a provision in the Coast Guard Appropriations Bill which would have over ruled the rights of most of the crewmembers the cruise line companies hire to work onboard their ships. This one piece of legislation would have defeated well established law which protects the crewmembers working aboard the cruise ships. The law recognizes that the crewmembers are subject to abuse by the shipping companies, and need added protection given to them by the Courts. Despite this, the cruise line companies have utilized all of their efforts to defeat these rights of the seamen. They continue to attempt to do so.

Notwithstanding the recent catastrophe involving the BP Oil spill, Congress has still not amended the Death on the High Seas Act to rectify the severe consequences regarding the limitation of damages available to family members of the deceased. Again, the cruise lines were heavily involved in lobbying efforts to make sure this legislation amending the Death on the High Seas did not pass.

When we assisted in the efforts to defeat legislation proposed by the cruise line companies to defeat seamen rights, we brought up the issue of taxation of the cruise line companies. As soon as the cruise line companies heard the word "tax", there was a substantial backing off of their position at the time.

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I also testified during Congressional hearings addressing cruise ship safety and reporting requirements. I was selected to testify as a Maritime Expert. During the hearing that I testified at, one of the Senators was very adverse to my position, and was very vocal. He pointed out to me that the cruise line companies bring a lot of revenues to his state, which was the State of Florida. He was defending the cruise line companies because of the amount of revenues they generate within the State of Florida. Of course this was irrelevant to the issues pending before the committee, which was the need for additional safety measures to protect the United States passengers aboard cruise ships. However, it shows the power the cruise line companies have as a result of their lobbying efforts, including substantial contributions to different Congressmen.

I believe what makes our American Justice System so great is that in the courtroom, these large companies are on equal footing with the individual. We have represented individuals against these big companies that yield enormous power in Congress. However, before a jury which is unbiased, the individual, be it a United States citizen or even a foreign seaman seeking justice, stands on equal footing with the large corporation. This is the beauty of our system.