Cruise holidays are taxed much less than hotels, study finds

A night on a European cruise is taxed almost half as much as a night in a hotel despite their high environmental costs and contribution to overtourism, a new study has found.

The NGO Transport & Environment (T&E) found that a loophole allows cruise liners to avoid paying VAT and fuel taxes, among other things.

The organisation is calling for tax reforms to ensure that ships “pay their fair share”.

Cruises have ‘same benefits as freight transport’

A night on a cruise ship is taxed 40% less than a hotel, the T&E study shows. That is despite their high environmental and climate costs, and the strain they put on local infrastructure.

The analysis looked at the taxes for €100 a night hotels in France, Italy and Spain, and compared them to cruises with similar prices. On average, people who stay at hotels will pay 23% of the price in taxes, while cruise passengers will only pay 12%.

Cruises are legally classified as a form of maritime transport, while in practice they function as holiday accommodation. This loophole allows them to avoid paying VAT and fuel taxes, among other things, the organisation says.

“We are treating floating hotels like they are essential maritime infrastructure,” said Fanny Pointet, Shipping Manager at T&E.

“Cruises are not a mode of transportation but the destination itself, yet we are giving them the same benefits as freight transport. Taxing cruise ships properly would help cities to tackle the pollution and to address concerns of overtourism.”

The study shows that a large share of negative emissions – greenhouse gases and air pollutants – generated by cruise ships are not covered by existing tax policies.

In France, Spain and Italy, those external costs (i.e. real-world damage) ranged between €790 million and €1.3 billion in 2025, according to the research.

On average, the climate-related external costs of this sector exceed what it pays under the EU’s carbon trading system (ETS) by a factor close to two to three. For costs related to air pollution, there is no such tax existing at the EU level.

Higher taxes, caps and VAT needed

A €15 tax per passenger per port call would raise €335 million a year in Italy, France, and Spain combined, according to T&E’s modelling.

These revenues could go back to national budgets, be earmarked for the protection of ecosystems in coastal areas or used to finance green infrastructure like onshore power supply.

But these taxes won’t be enough by themselves to close the gap between the environmental cost of cruises and what they pay to compensate, the organisation says.

“A cruise ship levy must be viewed as part of a broader regulatory mix,” Pointet said. “To fully mitigate the sector’s environmental footprint, parallel supply-side policies are necessary.”

T&E recommends strengthening EU regulations on sustainable marine fuels (FuelEU Maritime) and tightening energy efficiency benchmarks.

Cruise ship traffic could also be restricted when necessary, for example by capping the number of daily or annual port calls. Finally, VAT for cruise ships should be aligned with land-based tourism, says T&E.