Carnival and Royal Caribbean Made $4.8 Billion in 2024. They Paid the U.S. $45 Million in Tax.

Cruising is now a 34.64-million-passenger-a-year business, and North America supplies more of those passengers — 20.53 million in 2024 — than any other region on earth, according to Cruise Lines International Association's 2025 State of the Cruise Industry Report.▸ The two companies that carry most of them, Carnival Corporation & plc and Royal Caribbean Cruises Ltd., filed their fiscal 2024 annual reports with the SEC within weeks of each other this past winter. Between them, the two companies reported $4.81 billion in net income. Between them, they reported paying the United States $45 million in federal income tax — an amount smaller than what either company spent building a single new ship.

Neither company hides how this works — it's laid out in their own SEC filings under a section every cruise-line 10-K carries, titled "U.S. Income Tax."▸ Carnival Corporation & plc's Form 10-K reports income before income taxes of $1,915 million for the fiscal year ended November 30, 2024, an income tax benefit — not an expense — of $1 million, and net income of $1,916 million. Royal Caribbean Cruises Ltd.'s Form 10-K reports net income of $2,896 million for the fiscal year ended December 31, 2024, against an income tax expense of $46 million — pretax income of $2,942 million. Add the two companies together: $4,857 million earned before tax, $45 million paid to the U.S. Treasury, $4,812 million kept. That's a combined effective federal tax rate of 0.9%, against the 21% every other U.S. corporation owes under 26 U.S.C. Section 11(b).

Of that $4,857 million combined pretax pool, almost none of it went to the government that presided over the ports these ships sail from.

The mechanism is Section 883 of the Internal Revenue Code, which excludes a qualifying foreign corporation's U.S.-source income from the international operation of a ship from U.S. federal income and branch-profits tax.▸ Both companies invoke it by name in their 10-Ks. Carnival Corporation was incorporated in Panama in 1974; Royal Caribbean Cruises Ltd. was incorporated in the Republic of Liberia in 1985. Carnival's ships are flagged in the Bahamas, Bermuda, Italy, the Netherlands, Panama, and the UK — none of them the United States, despite the ships sailing from Miami, Port Canaveral, and Galveston.

The rule was meant to prevent double taxation between countries that tax each other's shipping companies equally.▸ A U.S. Treasury Federal Register notice explaining the Tax Reform Act of 1986's rewrite of Section 883 says so directly: before 1986, the exemption turned on where a ship was documented, not where its owner was organized — a loophole the notice says let "foreign corporations that documented their ships in ... flag of convenience countries" claim the U.S. exemption without any reciprocal U.S. shipping presence to protect. Congress tightened the test in 1986 to require organization in, not just flagging by, a reciprocal country. Carnival and Royal Caribbean now satisfy that tightened test by being organized in Panama and Liberia outright.

The arrangement drew a rare public threat in 2025.▸ On February 20, Commerce Secretary Howard Lutnick told Fox News that cruise ships "have flags of Liberia or Panama. None of them pays taxes. Every supertanker — none of them pays taxes. This is going to end under Donald Trump." The four largest U.S.-listed cruise operators — Carnival, Royal Caribbean, Norwegian, and Viking — lost a combined $9 billion in market capitalization by the close of trading that day, after an intraday drop of $15.4 billion. Eliminating the exemption requires an act of Congress, not a regulation, and none has passed; both companies' FY2024 filings, submitted months after Lutnick's remarks, still describe themselves as exempt under Section 883.

The corporate structure that keeps the tax bill near zero is the same one that determines who counts as the workforce.▸ Royal Caribbean's 10-K breaks its own headcount into two columns — "U.S. Based Employees" and "International Employees" — for every category of worker it employs. The shoreside column splits close to evenly: 4,250 U.S.-based versus 4,850 international. The shipboard column doesn't split at all: 0 U.S.-based against 95,150 international, and the same is true of its 1,750 private-island staff. Ninety-one percent of the company's roughly 106,000 employees carry no U.S.-based designation whatsoever, and 88% of its shipboard workforce is covered by collective bargaining agreements negotiated under foreign, not American, labor law.

Carnival doesn't publish the same U.S./international split, but its own numbers point the same direction: an average of 100,000 people worked its ships in 2024, "sourced from approximately 150 countries," against 12,000 full-time and 3,000 part-time shoreside employees back on land.▸ 52% of Carnival's shipboard workforce is under collective bargaining agreements, versus 22% shoreside — a gap that tracks Royal Caribbean's almost exactly.

Those shipboard agreements don't answer to the U.S. minimum wage, because the ships and the companies that own them are organized under Panamanian and Liberian law.▸ The wage floor that anchors many flag-of-convenience shipping labor contracts instead comes from Geneva: the International Labour Organization's Joint Maritime Commission sets a global minimum monthly basic wage for an able seafarer, currently $690 a month as of January 2026, rising to $704 in 2027 and $715 in 2028. Annualized, that floor is $8,280 a year — against $15,080 a year for a full-time job at the U.S. federal minimum wage of $7.25, a rate that hasn't moved since 2009. The ILO figure is a global regulatory floor, not a disclosed wage at either company — but it is the floor the industry's own flag choices put in play instead of American wage law.

Money figures are as reported in each company's fiscal year 2024 Form 10-K — Carnival's fiscal year ends November 30, Royal Caribbean's ends December 31, so the two "FY2024" periods overlap but are not identical. Workforce figures are each company's own year-end headcount, not a combined or reconciled total. The ILO able-seafarer minimum wage is a sector-wide floor set through Geneva negotiations; it is not a reported wage at either company and is presented only as the regulatory benchmark that flag-of-convenience registration substitutes for U.S. minimum-wage law.