Hoteliers Applaud Dutch Government Move to Rescind Its Air Tax
CORAL GABLES, FL (April 15, 2009) - The Advocacy Committee of the Caribbean Hotel and Tourism Association (CHTA) is spearheading a drive to intensify Caribbean lobbying in the United Kingdom to avert the planned increases in the U.K. Air Passenger Duty.
'Of urgent importance is the proposed increases contained in the UK Finance Bill before the UK parliament on air passenger duty starting on November 2009 where Caribbean bound passengers will pay a minimum of 50 Pounds Sterling per passenger for economy travel and double for any higher class of travel,' said Enrique De Marchena Kaluche, president of CHTA. 'Worst, these fees will increase in November 2010,' he said, adding:
'Pending changes to the U.K. Air Passenger Duty are expected to result in increased levels of duties applied to air tickets from the UK to all destinations. Of particular concern to us in the Caribbean are the high levels of duty to be applied to tickets to the Caribbean as well as the discrimination against the Caribbean region by illogically allocating it to a higher tax band than major competing destinations.'
Caribbean hoteliers, local hotel association executives and tourist office officials have begun lobbying Ministers of Tourism, Ministers of Aviation and even Prime Ministers to call for greater public debate, to share their concerns with the Ministers responsible, and to encourage governments to do more to lobby in the United Kingdom with Ministers and parliamentarians the Diaspora, airlines, tour operators and other interested parties.
At the same time, the hotel association executives from across the region are applauding the Dutch government's recent decision to rescind a similar air tax instituted this year, noting that the impact of the tax was counterproductive.
It is important to bear is mind that holidaymakers tend to book well in advance, often up to 12 months before departure. (Early January is the heaviest booking period in the UK for holidays.) The increases in APD levels are likely, therefore, to already be having an impact on the market.
'I urge a common effort by CTO, CHTA and UK-based tour wholesalers to come together in an effort to reverse this policy that constitutes a detriment for UK travel to the Caribbean,' De Marchena Kaluche concluded.
Background on the U.K. Air Passenger Tax
The UK has, for several years, imposed a tax (APD) on all passengers departing UK airports. The tax is currently set at four different rates: £10 for passengers travelling in the lowest class of travel available, and £20 for all other passengers flying within the European Economic Area, the European Common Aviation Area, countries applying to join the EU and Switzerland, and £40 and £80 respectively for passengers travelling to other destinations.
APD was initially introduced as a 'green tax' designed to account for aviation's impact on the environment. However, none of the £2 billion-plus currently collected is specifically devoted to environmental projects. In addition, the UK government is now saying that APD should in part be regarded as a contribution to general UK taxation.
In November 2008, after a lengthy consultation, the UK government announced that it planned to continue to collect APD, but with a number of significant changes. The amount paid would in part still depend on the class of travel, with the lower rates applicable to the lowest class.
However, the two distance-related Bands would be replaced by four. The Bands into which a country would be allocated would depend on the distance from London of its capital city (see Table below). In addition, there would be substantial increases in the rate per passenger, and in the overall tax collection. The new structure will come into effect in November 2009.
For Caribbean countries there are two issues in particular with what the UK is proposing. First, the amount of tax paid by a visitor from the UK will increase substantially, with an inevitable detrimental impact on demand at a time when the Caribbean economies are already suffering as a result of the global economic downturn.
For example, a tourist travelling in Economy Class who previously paid £40 in tax will pay £50 (+ 25%) from 1 November 2009, and £75 (+ 87%) from 1 November 2010. The percentage increases for passengers travelling in Premium Economy and Business Class are +25% from November 2009 and +94% from November 2010.
The impact on the Premium Economy market (popular with upmarket tourists to the Caribbean) is particularly damaging given relative fare levels.
The second issue is that all Caribbean countries have been placed in Band C because their capitals are between 4,001 and 6,000 miles from London. However, the whole of the United States (including California, Alaska, even Hawaii) has been placed in Band B because Washington DC is less than 4,000 miles from London.
Officials are wondering how the environmental impact of a flight to, say, Barbados is the same as that of a flight to Hawaii.
Perhaps even more important, though, is the competitive impact of the different tax rates. A family of four travelling Economy to the Caribbean will pay £300 from November 2009, compared to £240 if they travel to Florida. (The comparable figures are £600 and £480 respectively for Premium Economy or Business Class travel).
In a highly competitive and declining tourist market, such a price disadvantage can have a measurable impact on demand.
The Caribbean Council in the U.K. has been providing information and support on this issue which CHTA regards as crucial to the competitiveness of the industry.
