The Bahamas plans to charge cruise lines 10% for goods and services provided on its private islands, according to the local newspaper The Tribune. The government plans to implement the new tax on March 1.
The measure would end a nine-year streak in which the government has exempted private islands from Bahamas value-added tax.
Finance Ministry Secretary Simon Wilson told The Tribune that VAT puts private island businesses at the same tax level as Bahamian residents who sell goods and services to travelers in other destinations.
The vast majority of cruise line private destinations are in the Bahamas, such as Royal Caribbean's Perfect Day at CocoCay, Norwegian Cruise Line's Great Stirrup Cay, Disney Cruise Line's Castaway Cay and the 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 (scheduled to open in 2025).
The swift implementation could put cruise lines in a position to absorb much of the tax increase for some time, given the industry's historically high booking curve.
For example, Norwegian Cruise Line Holdings said in November that the company had between 60% and 65% of its 2024 itineraries booked for the next 12 months, calling it a record.
The decision comes less than a year after the Bahamas government announced it would raise the cruise passenger tax a few weeks in advance.
In July 2023, the tax will increase from $18 to $23 for guests stopping in Nassau and Freeport. For cruise passengers stopping at a private island, the passenger tax is now $25.
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