Taxing flights

Caribbean countries consider tax cuts to boost inter-regional travel.

Gaston Browne, Prime Minister of Antigua Barbuda and chairman of CARICOM announced in June 2021, prior to assuming office in July, his ambition to continue pushing for a reduction in regional taxes on air travel. Browne’s main aim is to stimulate regional aviation and tourism within the Caribbean.

A regional advisor on tourism to several Caribbean governments explained, “Aviation taxes are high, which makes inter-regional travel expensive. Also, it has been a long lockdown, and many Caribbeans are anxious to undertake VFR tourism (visit friends and relatives), predominantly to North America. Despite this, most countries have higher international tourism arrivals rather than regional so there is no real incentive for these markets to reduce taxes.”

Throughout the last two decades, multiple citizen initiatives have lobbied their local state authorities to reduce high aviation taxes in place for travelling between Caribbean countries. In this context, the 2019 ‘Caribbean Citizens against high intra-regional taxes’ gathered 20,000 signatures. Regional forums such as the Caribbean Tourism Organisation and the Caribbean Hotel & Tourism Association have shown their satisfaction for the review of the currently high aviation taxes.

The tourism advisor also warned, “If you reduced inter-regional travel taxes, it will have a significant impact on the revenue of some governments. Different governments have different debt positions so there is unlikely to be a consensus on the policy of reducing taxes.”

“Different governments have different debt positions so there is unlikely to be a consensus on the policy of reducing taxes.”

Regional advisor on tourism to several Caribbean governments

The Bahamas has been one of the main drivers behind the initiative by presiding the CARICOM Sub-Committee on Tourism and pushing forward in the organisation’s agenda the need to review tax policies. Barbados has also been supportive of the initiative announcing in July 2021 that it would reduce airport taxes by 50%, a measure implemented earlier in the year by Antigua Barbuda. However, not all governments remain convinced about potential tax cuts for fear of having to provide more generous subsidies to tourism-related infrastructure such as airports. Grenada, St. Vincent and the Grenadines and St. Kitts and Nevis are reportedly among those reluctant to consider the revision.

A tourism executive and regional representative explained, “Antigua was the first to proceed with these tax cuts but it is not really a novel idea. The cost of travel between islands is prohibitive for most people so, as an industry, we supported the cuts to try and increase movement within the region. Especially as COVID-19 has made travelling to traditional markets such as North America and Europe impossible for the foreseeable future.”

“The cost of travel between islands is prohibitive for most people so, as an industry, we supported the cuts to try and increase movement within the region.”

Tourism executive and regional industry representative

Both regional carriers such as Southwest Airlines, JetBlue and Ryan Air and IATA argue that lower airfares are the main driver behind the increase in air travel. Regional sector experts emphasise that 40% of hotel rooms in the region that remained vacant throughout the year prior to the outbreak of COVID-19 could be filled by regional tourists who might be stimulated by lower airfares. This would ultimately result in a growing interest for international airline carriers to operate intra-regional Caribbean routes.

The tourism executive was hopeful that tax reductions could help, “I think we could see intra-regional travel increase by about 25%. Many destinations are starting to see better arrival rates but most countries need to improve their offerings for VFR travel because people are still unsure about travelling and budgets are tight.”

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