ANTIGUA |Browne wants tax reduction on airline tickets in the region
ST. JOHNS, Antigua and Barbuda, June 7, 2021 - The Prime Minister of Antigua and Barbuda, Gaston Browne, has repeated his call for regional governments to examine the possibility of reducing the tax on airline travel within the region so as to make regional travel more affordable.
Prime Minister Browne, says the coronavirus (COVID-19) pandemic has provided Caribbean governments the perfect opportunity to cut taxes on airline tickets across the region.
“Now is the time for us to cut the taxes even by 50 per cent and I do accept that you may not be able to determine the elasticity of pricing on travel demand because naturally regional and intra-regional remain relatively low during this period of COVID.
“But the fact that you are not collecting, or you hardly collect anything at this time, it is not revenue you are giving away. You can’t give away what you are not earning,” said Browne, who intends to use the chairmanship of the CARICOM, which he will assume in July, to push the initiative.
He said the leaders of the sub-regional Organisation of Eastern Caribbean States (OECS) are supportive of the initiative since there are other financial benefits to be obtained as a result.
“I have said to my colleagues within the OECS that now is the time. I can tell you that my colleagues are looking at it seriously and I believe we should be able to convince them to do something now,” Browne said, adding that the cut in taxes could be for a temporary period.
“It could even be for a temporary period. If we say, look between now and the end of the year to 12 months I have no doubt that one, it will result in incremental revenue and at the same time it will also give us some idea…maybe the price elasticity of these tickets…that carry a heavy component in terms of government taxes.
“I am of the view that is one of the ways to incentivise fully vaccinated persons. We can have a bubble involving fully vaccinated persons to allow them to check travel intra-regionally and without any quarantine.
“So there are multiple benefits by introducing such a policy. I so accept it is something that should have been done before but I believe that again COVID has given us the opportunity to do it now and we ought not to do so,” Browne said.
In May last year IATA urged Caribbean governments to cut passenger taxes if they wanted to benefit from the post-pandemic recovery.
Cerda, warned that the aviation sector will emerge from the crisis with fewer carriers offering leaner services to fewer routes and flying smaller aircraft. And “when it comes to the Caribbean, it won’t be the same market”.
Therefore, he says, regional governments must prepare for this eventuality by taking the necessary steps to reduce the cost of air travel.
“Governments can … help the international carriers continue to operate there [by] lowering passenger fees and taxation fees,” Cerda suggests.
“One of the biggest problems that we've always faced in Caribbean, is the Caribbean is a very highly taxed market. And it's always taxed on the airline side, on the passenger, consumer side. And this will be a big challenge for the Caribbean once we are able to escape from this crisis.”
The IATA executive predicted that in the early stages of the resumption of air travel the people who fly would rather remain close to home. He says the Caribbean’s proximity to the United States and Canada gives it an advantage in this case, but it can quickly lose this advantage if the countries fail to be prudent.
"Governments have to foster positive business environments through consultation with the industry and transparency in order to ensure win-win situations for all," said Cerda.
He said that each $1 increase in ticket tax could result in 40,000 fewer passengers, $20 million less tourist spending and 1,200 fewer jobs.
Prior to the pandemic, Caribbean tourism and aviation facilitated and supported more than 140,000 jobs and contributed $3.12 billion, which represents 7.2% of the Caribbean’s GDP, according to Cerda.