By Cdr. Bud Slabbaert
If an airport in the Caribbean wishes to be an international hub, or even a regional hub, it is probably well advised to drop departure taxes and other passenger taxes. Passenger taxation is “swamp taxation” because no one besides the receiver wants it, and it sucks.
“Dutch Government ditches passenger ticket tax in efforts to halt declining traffic at Amsterdam International Airport”, the media reported in 2009. It was first camouflaged by the name “eco”-tax. The controversial departure tax, ranging from 11 to 45 euros, was blamed for a steep decline in passenger traffic within a year after its introduction.
The tax was expected to raise around US$395 million a year but a commissioned report concluded that it would cost the Dutch economy US$1.7 billion in lost revenue. Passengers were driving across the border to neighboring airports in Belgium or Germany to avoid the tax.
Could that dynamic happen in the Caribbean? Sure! Passengers will opt for a different island hub or destination that doesn’t have the taxes, but does have the sun, the beaches and the palm trees, plus the new discovery may even have more to offer. Competition in doubled degree.
A 2017 report of PwC (PricewaterhouseCoopers) commissioned by “Airlines for Europe”, provided an independent overview of the current air passenger taxes in Europe and an assessment of their economic impact. PwC simulated the impact of abolishing the tax entirely in January 2018 in Germany.
Some of the results of the study: 24.6 million additional arrivals by 2020; 10.5 million extra inbound tourist arrivals by 2020; 1.8 billion US$ additional expenditure by 2020. It was estimated that the total existing passenger taxes will raise US$1.2 billion in a year, however after the abolition of all taxes 108 per cent of this will be recouped in indirect tax income anyway. The abolition of the air passenger tax would boost the country’s GDP by US$79 billion cumulatively over the next 12 years.
ICAO is the International Civil Aviation Organization, a specialised agency of the United Nations. It codifies the principles and techniques of international air navigation and fosters the planning and development of international air transport to ensure safe and orderly growth. ICAO is distinct from other international air transport organisations, like the International Air Transport Association (IATA), a trade association representing airlines.
ICAO has clear policies on taxation and member states are urged to apply ICAO policies on taxation in regulatory practices. ICAO Assembly Resolutions have repeatedly urged member states to follow the ICAO policies on taxation and not to impose taxes on the sale or use of international air transport. Yet, member states have not included in their ASA’s (Article on Taxation) a commitment to reduce or eliminate taxes on the sale and use of international air transport.
Caribbean member states of ICAO are the sovereign countries: Antigua and Barbuda, Bahamas, Barbados, Cuba, Dominican Republic, Grenada, Haiti, Jamaica, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Trinidad and Tobago.
Already, in 2013, at their Worldwide Transport Conference, the ICAO issued the following text to be included in their Template Article on Taxation (TASA):
“… Each party shall undertake to reduce to the fullest practicable extent and make plans to eliminate as soon as its economic conditions permit all forms of taxation on the sale or use of international air transport, including such taxes for services which are not required for international civil aviation or which may discriminate against it.”
According ICAO a tax is a levy that is designed to raise national or local government revenues, which are generally not applied to civil aviation in their entirety or on a cost specific basis. ICAO has also recognised that in the past decades there is a development of tourism taxes in some regions, in particular Latin America, the Caribbean and to a lesser extent in Africa, up to US$55. In many cases, revenues from the tourism taxes such as tourism enhancement fee and travel promotional levies are not being reinvested in tourism development. The Caribbean may get the reputation of being one of the bad guys on the block in that regard.
The main principles on taxation contained in ICAO policies are frequently adopted by international organisations in policy documents. Some regional organisations and industry associations, such as the Airports Council International (ACI) and the International Air Transport Association (IATA), have also developed policies that are opposed to discriminatory and unfair government taxation on air transport.
The World Tourism Organization (UNWTO), while not opposed to taxes per se, as part of the overall fiscal responsibility of States, considers that travel taxes should be scrutinised objectively to avoid excessive burdens on travellers/companies with a view to reducing taxes that have a negative impact on travel and, hence, on tourism development.
Despite these policies, the past decade has seen an unprecedented proliferation of taxes levied on air passenger tickets in the region. This trend is causing serious concerns and has a negative impact on the sustainable development of air transport, which, ultimately, negatively impacts the tourism industry and the overall national economic development.
Caribbean governments are well advised that before making a decision, an independent evaluation by qualified professionals acquainted with economics should be made on the impact of passenger taxation.
A “neat” idea to get some extra money in the coffers, may turn out to be a monkeynomics.
What plays a crucial role and contributes significantly to an economy must not be hindered by ineffective government taxation.
The views expressed herein are those of the writer and do not necessarily represent the opinions or editorial position of iWitness News. Opinion pieces can be submitted to [email protected].
The opinions presented in this content belong to the author and may not necessarily reflect the perspectives or editorial stance of iWitness News. Opinion pieces can be submitted to [email protected].
Wont happen in little SVG any time soon because there would be no value added given that it wouldnt encourage more tourist arrivals, at least to the mainland because of its lack of attractions, on the one hand, nor affect the travel of nationals, on the other.
Your analysis applies only to tourist islands like Barbados.
Why do persons say the mainland lack attraction? Saint Vincent is one of the most beautiful Islands in Caribbean aside from the Grenadines. This is not a fallacy. This is a fact. All we need to do is to enhance our various tourist sites by investing a little money in their beautification.
We need to develop a strategic plan to enhance our various tourist sites, clean and beautify our beaches, invest more heavily in tours and work on our service delivery in the hotel and restaurant sector. We need to have a more structured approach in our service delivery.
If our mainland contained the unknown attractions you fail to mention, we would have had a booming tourism industry years ago. Various governments have indeed enhanced or developed several sites over the decades but because their potential for development was so low, this had no effect on increasing tourism.
Yes, we have a visually beautiful mainland but this is neither necessary nor sufficient to attract tens of thousands of tourists.
For example, clean and beautiful beaches mean nothing if they consist of hot, course, and unappealing black sand.
This is why Buccament Bay Resort imported tonnes of white sand from Guyana to build a false beach to cover the ugly black sand below.
The best way for our people to understand that our tourist attractions are insufficient in quality and quantity is to spend a few days holidaying in our closest neighbours, Grenada and St. Lucia.
I assume that you have never done so or you wouldnt have written Why do persons say the mainland lack attraction? If you have spent time in these two countries visiting their superior tourist attractions and bathing on their beautiful white-sand beaches and still think that we have lots of potential to attract hordes of tourists with a little sprucing up here and there, then you are blind.
Not so in the eyes of few, Sir. I’ll always promote SVG, love this place.