Studies have shown that Cruise ships that are under the flag of convenience fly foreign flags to avoid U.S.taxes.
In a study authored by Caitlin E. Burke, University of Florida it has been found that Cruise lines have been flying under other flags as early as the 1920s to avoid prohibition laws and sell alcohol on the ship (Refer Page No:6). It stated Cruise lines escape federal taxes and labour laws by registering their corporations and vessels in foreign countries, i.e. Panama, Liberia, and the Bahamas.
Organized Crime and Corruption Reporting Project has revealed that the largest cruise company Carnival, Norwegian and Royal Caribbean have been incorporated in Panama, Bermuda and Liberia. They have been paying an average tax rate of under 1% well below the required 21% corporate tax rate in the United States.