The Bahamas will hit cruise lines with tax on private islands

15.02.2024 - 22:44 / travelweekly.com / Royal Caribbean

The Bahamas plans to charge cruise lines 10% on goods and services provided on the their private islands, according to reports.

According to Bahamas newspaper The Tribune, the government plans to implement the new charge on March 1.

The move would end a nine-year run of the government exempting the private islands from the Bahamas' value added tax (VAT).

The Ministry of Finance's financial secretary, Simon Wilson, told The Tribune that the VAT puts private island activities at the same level of taxation as Bahamians who sell goods and services to travelers at other destinations.

The vast majority of the cruise lines' private destinations are located in the Bahamas, including Royal Caribbean's Perfect Day at CocoCay, Norwegian Cruise Line's Great Stirrup Cay, Disney Cruise Line's Castaway Cay and new Lookout Cay at Lighthouse Point (scheduled to open in 2025), MSC Cruises' Ocean Cay, Princess Cruises' Princess Cays, and Carnival Cruise Line's Celebration Key (coming in 2025).

The quick implementation could put cruise lines in a position to absorb a large portion of the tax increase for some time, given the historically high booking curve in the industry. For example, Norwegian Cruise Line Holdings said in November the company had between 60% and 65% of 2024 itineraries booked for the next 12 months, calling it a record high.

Anthony Hamawy, president of Cruise.com, contends this latest tax could affect travel advisors if cruise lines increase the amount of noncommissionable fees (NCFs) to offset the tax.

He also expects cruise lines will eventually pass along the cost to consumers by increasing prices.

"We are all about to take a pay cut thanks to this," he said.

Travel Weekly sought comment from CLIA, the Florida-Caribbean Cruise Association and major cruise lines.

The decision comes less than a year after the Bahamas government announced it would increase the cruise passenger tax with a few weeks of notice. In July 2023, the tax increased to $23 from $18 for guests calling at Nassau and Freeport. For cruisers calling at a private island, the passenger tax is now $25.

Plus, the government in January imposed a $5 tourism environmental tax and a $2 tourism enhancement tax on each cruise passenger.