QM2 gratuities

[Normandie_Nostalgic]

If it is a tax fiddle, as indeed it seems to be, then it might go away one day. Governments around the world are going after uncollected taxes, loopholes and untaxed income. Once they have sorted out the Googles and the Starbucks, they very well might go after cruise ship crew members, repeal their tax breaks and force cruise companies to pay their fair due.

[Normandie_Nostalgic]

Believe me if a city revenue department decided if the amount collected it was worth their time they would go after it.

 

Of course they would, and probably they will. It does not have to be fair, or particularly subtle. All it takes is to have the power to enforce the collection of the tax, a prerogative that many governments and local authorities certainly do enjoy.

[Solent Richard]

Some do give the impression that they expect the envelope but if you have not removed the auto's there is no need to give more unless you wish. Or in fact if you have.

 

Tipping as operated on cruise ships (by no means all) is unfair on all parties, both passengers and hotel staff.

 

Tips could and should be incorporated in the price. Cunard won't because they are racing the competition to the bottom.

 

David.

 

Don't you just love a statement of fact.

 

Two days after the above comment I received an email from Celebrity...

 

"We look forward to welcoming you onboard soon for your upcoming Celebrity cruise vacation!

 

As you prepare to set sail, we wanted to notify you of an update to our daily gratuities. As of June 1, 2015 for all sail dates beginning on or after July 1, 2015, Celebrity Cruises will be adjusting the automatic daily gratuity per day, per guest as follows:

 

• Standard staterooms - $12.00 to $12.95

 

• Concierge Class and AquaClass staterooms - $12.50 to $13.45

 

• Suite Class -- $15.50 to $16.45 "

 

Strikes me Cunard were mere 'also rans' in this race.:):)

[navybankerteacher]

So if BruceMuzz is correct then the reason for tipping is exactly as I have always suspected: It's a tax fiddle.

 

"Tax fiddle" may have some special meaning for you, but if Bruce Muzz is correct, a better term is simply competent management: getting the most net pay in the pockets of the crew at the least cost to the customers. Any decently managed enterprise seeks to maximize their net revenue - which means attracting the most customers while controlling costs - and anyone who does not recognize taxes as a potentially controllable cost of doing business is probably not fit to cruise without adult supervision.

[Tampa Girl]

Agree. Why is it whenever an issue of avoiding unnecessary taxes comes up, someone always cried "foul." But perhaps that was not what was meant by "tax fiddle."

[Margana]

"Tax fiddle" may have some special meaning for you, but if Bruce Muzz is correct, a better term is simply competent management: getting the most net pay in the pockets of the crew at the least cost to the customers. Any decently managed enterprise seeks to maximize their net revenue - which means attracting the most customers while controlling costs - and anyone who does not recognize taxes as a potentially controllable cost of doing business is probably not fit to cruise without adult supervision.

 

I’m confused. “getting the most pay in the pockets of the crew at the least cost to the customers.” It still looks to me that the customer is paying a large proportion of crew wages through the auto-gratuity system – around 28 million dollars.

While minimising the tax which crew might pay is good for the crew (who likes paying tax), it also allows the company to pay less. Isn’t the “competent management” really more interested in the tax which can be avoided by legal registration of Carnival in Panama (according to Forbes), and registration of Cunard ships in Hamilton, Bermuda. The former allows legal avoidance of US taxes and the latter avoidance of UK Employment Laws which would require all staff from EU countries to be paid wages equal to UK citizens. The tax saving by foreign registration is huge compared to any crew wage saving. It’s legal, it’s not a fiddle, but is it really for the benefit of the customers?

[ToadOfToadHall]

Paying people a wage and calling at a "gratuity" in order to avoid tax is a tax fiddle. It's quite simple to understand.

[Margana]

Don't you just love a statement of fact.

 

Two days after the above comment I received an email from Celebrity...

 

"We look forward to welcoming you onboard soon for your upcoming Celebrity cruise vacation!

 

As you prepare to set sail, we wanted to notify you of an update to our daily gratuities. As of June 1, 2015 for all sail dates beginning on or after July 1, 2015, Celebrity Cruises will be adjusting the automatic daily gratuity per day, per guest as follows:

 

• Standard staterooms - $12.00 to $12.95

 

• Concierge Class and AquaClass staterooms - $12.50 to $13.45

 

• Suite Class -- $15.50 to $16.45 "

 

Strikes me Cunard were mere 'also rans' in this race.:):)

 

So another cruise company increase the amount of their auto-gratuities above the amounts which Cunard recommends. The previous poster appeared to be making the point that Cunard would not do away with auto-tips, thereby resulting in higher fares, and perhaps becoming less competitive in terms of the advertised price. The relative recommended auto-gratuity amount doesn't seem to have any relevance. Perhaps this could be explained?

[goodsailors]

Re all this chat about tips being a tax fiddle, I thought that because of the time spent out of the country salaries are tax free. Talking to a Captain some years ago he told us how much he earned which we all agreed at the dinner table was not much for being in charge of a multi-million pound ship and responsible for 3,000 or 4,000 people, he went on to say, of course it is tax free, which does make a difference. Would be interested to know if that is still the case and if so it can't be a tax fiddle.

[Margana]

Re all this chat about tips being a tax fiddle, I thought that because of the time spent out of the country salaries are tax free. Talking to a Captain some years ago he told us how much he earned which we all agreed at the dinner table was not much for being in charge of a multi-million pound ship and responsible for 3,000 or 4,000 people, he went on to say, of course it is tax free, which does make a difference. Would be interested to know if that is still the case and if so it can't be a tax fiddle.

 

Have a look at this.

 

https://www.gov.uk/seafarers-earnings-deduction-tax-relief-if-you-work-on-a-ship

[navybankerteacher]

Paying people a wage and calling at a "gratuity" in order to avoid tax is a tax fiddle. It's quite simple to understand.

 

I respectfully suggest you look up a definition of "tax fiddle". An above-board, non-secretive, and wholly legal compensation program simply does not meet any definition.

 

I suspect that what a lot of people who protest the lines' compensation policies are really doing is assuaging their pseudo-egalitarian feelings: posturing about preferring to pay higher fares to enable paying the crew "a living wage" - possibly because their own cultures are uncomfortable with performance-based compensation programs- rather than accepting other peoples' terms of employment which are evidently perfectly acceptable to both employer and employee.

[Margana]

I respectfully suggest you look up a definition of "tax fiddle". An above-board, non-secretive, and wholly legal compensation program simply does not meet any definition.

 

I suspect that what a lot of people who protest the lines' compensation policies are really doing is assuaging their pseudo-egalitarian feelings: posturing about preferring to pay higher fares to enable paying the crew "a living wage" - possibly because their own cultures are uncomfortable with performance-based compensation programs- rather than accepting other peoples' terms of employment which are evidently perfectly acceptable to both employer and employee.

 

What's performance based about an automatic gratuity system? Are you confident that the employees are perfectly happy with the conditions that the employer imposes, rather than grateful that they are employed and therefore accept the conditions?

[alc13]

Here's what I get from this fascinating discussion. Cunard imposes auto-gratuities as a way of ensuring proper compensation to their employees without causing them to pay more income tax, which they would if Cunard compensated them directly. Also, Cunard has determined that the current auto-tip structure is appropriate to bring total compensation to a competitive level. As long as it's legal, it is good business practice. Also very fair to the employees, since the income is predictable.

 

I seems to me that unless service has been generally bad, and I mean more than one bad apple (which should be handled with a complaint in any case), that the auto-tip should be looked on as part of the fare. I agree with a previous poster who said it's management's responsibility to sort out performance issues.

 

I also really detest an atmosphere where everyone seems to be working for tips. So bottom line, after digesting everything I've learned, I find I'm pretty content with the Cunard system.

[Normandie_Nostalgic]

There is nothing wrong about a cruise company taking advantage of advantageous tax laws across many jurisdictions. I suspect that the reflagging of the 3 Queens to Bermuda was not only, or principally, so that they can celebrate weddings at sea.

However, in this day and age, it is not enough that a company’s tax structuring is legal, or even plausible. Nowadays, there is increasing expectation that it be moral, or fair to each jurisdiction. The day will come when the tax authorities of the various countries of residence of the crew members will want to close that loophole of tips not being taxed. After all, tips are very much an income for the tip-earning staff, and it is manifest that the employer is collecting tips on behalf of employees, going as far as stating how much each passenger has to contribute. True, there is the option of opting out, mostly in order to preserve the pretence that it is a tip and not a compulsory part of the price of the cruise, but they make opting out a bit awkward. Obviously, the expectation is that most passengers will keep things the way they are, out of a sense of fairness or simply laziness, and that the cruise line will be able to collect the levy and share it according to a formula, removing one fundamental element of a ‘real’ tip, which is that it is discretionary.

As a result, tips easily can be considered a part of the remuneration, and taxed accordingly. And because it can, it necessarily will, eventually.

Edited May 23, 2015 by Normandie_Nostalgic

[Normandie_Nostalgic]

What's performance based about an automatic gratuity system? Are you confident that the employees are perfectly happy with the conditions that the employer imposes, rather than grateful that they are employed and therefore accept the conditions?

 

At any rate, Cunard's tipping policy can hardly be considered a performance-based system, because it is collective and near-compulsory, rather than individual and discretionary.

 

Besides, how does one define performance in a service industry ? Doing one's job according to the job description and to the satisfaction of one's supervisor is all the performance that can be expected from someone. The salary must be commensurate to that level of performance.

 

In well-run operations such as Cunard's, the level of performance expected from staff is fully explicit, and ruthlessly enforced. Such is the only way to ensure customer delight and repeat business, two things that Cunard still achieves outstandingly.

 

Consequently, there is really no need to mix tips with performance. Tips are fine, but they need to be individual and discretionary, neither expected nor sought. Going as far as considering them a part of remuneration, apparently for tax purposes, is a misuse of the entire notion. This is even more regrettable because it causes endless debate, moral discomfort and a sense of guilt among passengers. It is a bad system that really should be reformed.

Edited May 23, 2015 by Normandie_Nostalgic

[balf]

I respectfully suggest you look up a definition of "tax fiddle". An above-board, non-secretive, and wholly legal compensation program simply does not meet any definition.

 

This isn't a term that needs definition. We all know what it means.

 

David.

[balf]

Re all this chat about tips being a tax fiddle, I thought that because of the time spent out of the country salaries are tax free. Talking to a Captain some years ago he told us how much he earned which we all agreed at the dinner table was not much for being in charge of a multi-million pound ship and responsible for 3,000 or 4,000 people, he went on to say, of course it is tax free, which does make a difference. Would be interested to know if that is still the case and if so it can't be a tax fiddle.

 

I'm amazed that the captain would reveal the amount of his salary. I certainly would never tell anyone my income.

 

You are correct on the taxing of "offshore" workers. If the captain is tax free you can be sure the rest will be too.

 

David

[ToadOfToadHall]

I respectfully suggest you look up a definition of "tax fiddle". An above-board, non-secretive, and wholly legal compensation program simply does not meet any definition.

 

I suspect that what a lot of people who protest the lines' compensation policies are really doing is assuaging their pseudo-egalitarian feelings: posturing about preferring to pay higher fares to enable paying the crew "a living wage" - possibly because their own cultures are uncomfortable with performance-based compensation programs- rather than accepting other peoples' terms of employment which are evidently perfectly acceptable to both employer and employee.

 

If the US got rid of it's stupid tipping culture and paid people properly then the problem goes away.

 

I'll say it again so you grasp it: They are deliberately avoiding paying tax by calling "salary" a "gratuity" and thereby avoiding paying tax. The two things are clearly the same, only the name is different. It's not that hard to understand.

[Normandie_Nostalgic]

Well, it is not so simple. It depends on whatever that jurisdiction is applicable. Some tax regimes are strictly territorial. Any income not generated onshore is not taxable. But some consider that remittance matters (if you bring offshore income onshore, it becomes taxable then). Other systems are worldwide (such as the US, and an increasing number of other countries), potentially leading to double taxation. There are DTAs (Double Taxation Agreements) to prevent that, but it is not always perfect.

Finally, governments the world over are working to close as many loopholes as they can, to avoid the existence of 'stateless' income. OECD currently has underway a big project under way called Base Erosion and Profit Shifting (BEPS), which broadly calls for a co-ordinated international approach to combat tax avoidance by multinational enterprises. Only companies are in the crosshair for now, but eventually individuals will be targeted too, especially those whose income may otherwise escape taxation entirely.

There are also new pieces of legislation (Anti-Money-Laundering or AML) that ban payments in cash, make tracing money transfer automatic, with interesting algorithms to detect non-taxed income etc. 'Grey' money is running out of places to hide indeed.

[ToadOfToadHall]

Nowadays, there is increasing expectation that it be moral, or fair to each jurisdiction.

 

Exactly.

 

It's a blatant lie to call "salary" a "gratuity" when anyone can see they are, in this case, exactly the same thing.

[navybankerteacher]

I respectfully suggest you look up a definition of "tax fiddle". An above-board, non-secretive, and wholly legal compensation program simply does not meet any definition.

 

This isn't a term that needs definition. We all know what it means.

 

David.

 

Not all: Toad of Toad Hall does not.

[navybankerteacher]

At any rate, Cunard's tipping policy can hardly be considered a performance-based system, because it is collective and near-compulsory, rather than individual .../QUOTE]

 

Two points: much of the quality of service Cunard strives to provide is team-based, so the fact that the tipping policy is partially collective does not make it non-performance related; the fact that any decent person removing the gratuities would explain why certainly does make it performance related; and the fact that Cunard refers to additional tips being given in cases of really superior service further demonstrates the performance-based nature of Cunard's approach to compensation.

 

We are aware of the lack of familiarity/comfort many UK residents have with the concept of tipping, but the world is bigger than the UK. Tipping is a common practice in many parts of the world - including those parts where many of the staff who provide the services on Cunard's ships are recruited. To the extent passengers claim an ethical or moral basis for their opposition to tipping, they might demonstrate it by simply avoiding lines which apply the practice.

[Victoria2]

Paying people a wage and calling at a "gratuity" in order to avoid tax is a tax fiddle. It's quite simple to understand.

 

I thought you could get arrested for tax fiddles. Now a tax avoidance scheme is a whole different ball game.

[ToadOfToadHall]

Can we also therefore assume that the 15% "gratuity" applied on everything (well, almost everything) sold on board is also a tax fiddle ?

 

So instead of paying tax on the profit of say a drink, they only pay tax on 85% of the profit.

 

But again, since the 15% is not optional then it's clearly not a "gratuity" at all.

[Salacia]

If the US got rid of it's stupid tipping culture and paid people properly then the problem goes away.

 

I'll say it again so you grasp it: They are deliberately avoiding paying tax by calling "salary" a "gratuity" and thereby avoiding paying tax. The two things are clearly the same, only the name is different. It's not that hard to understand.

 

 

Say it as many times as you want, but calling income a 'gratuity' as opposed to a 'salary' does not result in avoiding payment of taxes in many countries. For example, in the USA, income from tips must be reported to the IRS* (details here http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Reporting-Tip-Income-Restaurant-Tax-Tips ) Consult a world-wide tax guide for tax laws in other countries.

 

My understanding is that for many years, the custom on cruise ships (including Cunard) was to give an envelope containing a suggested amount of gratuity to the cabin steward and dining room servers on the last night of the voyage. I have been told by people from the UK that this was a popular practice, and was not interpreted as being the result of any particular country's custom. To state that the practice of tipping results from the "stupid tipping culture" in the US is a bit of a reach.

 

Salacia

 

*The income tax reporting system on tips is similar in the UK https://www.gov.uk/tips-at-work/tips-and-tax

Edited May 23, 2015 by Salacia