UK-tax negatively impacts Caribbean tourism: Abolition air passenger duty could create 60,000 new jobs

POSTED: 02/6/13 12:15 PM

St. Maarten – A recent study by PricewaterhouseCoopers shows that the abolition of the United Kingdom’s air passenger duty could bring a lasting boost to the UK economy, generate a net tax gain for the treasury and create almost 60,000 new jobs. The abolition of the tax would have an immediate positive impact on the Caribbean region with tourism destinations that are heavily dependent on the UK market as the major beneficiaries.

Caribbean Hotel and Tourism Association president Richard J. Doumeng, Caribbean Tourism Organization chair Beverly Nicholson-Doty, Councils of Ministers and Commissioners of Tourism, are supporting the abolition of this tax.

“For the Caribbean the tax is extra-territorial in effect, and is damaging the region’s tourism economy. For this reason the region has argued that at the very least the discriminatory aspect of the tax, which favours the continental United States, should be addressed by re-banding the Caribbean to the same level as the continental US,” Doumeng and Nicholson-Doty said in a joint statement.

“CTO and CHTA would hope that the UK Chancellor carefully studies the PWC report and recognizes that the air passenger duty (APD) is damaging the UK travel and tourism industry and by extension the vulnerable economies of the Caribbean, the most tourism dependent region in the world.

“Up to now, despite the weight of UK Parliamentary support for the Caribbean and for the UK industry, the Chancellor has chosen to ignore the evidence that suggests the tax is counterproductive. Let us hope that this is the moment when he takes note of figures independently produced that indicate that APD is hugely damaging and its abolition could create growth.”

Since the advent of the four-band system for the APD, St. Lucia, Barbados, Antigua & Barbuda, Cuba and the Dominican Republic have recorded significant decreases in arrivals. Recent analysis by the CTO shows that UK arrivals to the Caribbean fell by 10% in the first quarter of 2012 in comparison to a 3% fall in UK holiday departures worldwide in the same period. Almost all the decline has been in the lower end price sensitive part of the market. The Dominican Republic saw almost 13,000 fewer visitors and Cuba 11,000 fewer from the UK for example.

Further supporting this is data from the UK’s Civil Aviation Authority (CAA) which makes clear that international passenger traffic between the UK and the Caribbean decreased by 10.7% between 2008 and 2011. This compares with a 1.1% overall increase in the UK’s international passenger traffic over the same period. In addition, the UK Office for National Statistics (ONS) figures indicate that Caribbean arrivals are declining, with a 7.6% fall in visits by air to the region by UK residents between 2008 and 2011.

Supporting the reform in APD for the region could boost tourism, which would in turn help the Caribbean economy at a time when it is in a fragile state.

The Caribbean has argued that at a time when the Caribbean is experiencing low GDP growth and high levels of debt, and food and energy prices are rising, re-banding the Caribbean would provide a boost to the Caribbean economy in a way that is both valuable and effective.

Tourism is the largest contributor to economic growth in the Caribbean contributing an average of 14.7% to all of the Caribbean GDP in 2011. However in countries that are tourism dependent this figure rises to as much as 74.2% of GDP (Antigua and Barbuda).

 

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