The Bahamas will hit cruise lines with a tax on private islands

According to the Bahamian newspaper The Tribune, the government plans to introduce the new tax on March 1st. This step will end the nine-year period of exemption for private islands from paying value-added tax (VAT) in the Bahamas.

Simon Wilson, the Financial Secretary of the Ministry of Finance, stated that VAT will subject the activities of private islands to the same level of taxation as Bahamians selling goods and services to travelers from other countries. This information was reported by travelweekly.com.

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

The rapid implementation could provide cruise lines with the opportunity to absorb a significant portion of the tax increase for some time, given the industry's historically high booking curve. For example, in November, Norwegian Cruise Line Holdings stated that the company has 60% to 65% of its 2024 itineraries booked for the next 12 months, marking it as a record high.

Anthony Hamawi, president of Cruise.com, believes this latest tax could impact travel advisors if cruise lines increase their non-commissionable fees (NCFs) to offset the tax. He also anticipates cruise lines eventually passing the cost onto consumers by raising prices.

The Florida-Caribbean Cruise Association and major cruise lines noted that the decision was made less than a year after the Bahamas government announced a tax increase on cruise passengers. In July 2023, the tax rose to $23 from $18 for guests calling at Nassau and Freeport. For cruises calling at a private island, the passenger tax is now $25.

Additionally, in January, the government introduced a US$5 tourist environmental tax and a US$2 tourism development tax per cruise passenger.