The Business of Tourism: APD continues to cause economic damage
David Jessop, Contributor
Despite clear evidence that visitor arrivals into the Caribbean from Britain are continuing to decline - down by 9.6 per cent in 2011 - the United Kingdom's (UK) coalition government has chosen once again to ignore the representations made by Caribbean Governments about the economic damage caused by air passenger duty (APD).
This year, in his March 20 budget address, George Osborne, the UK's chancellor of the exchequer (finance minister), chose not even to mention the tax. Instead, he left confirmation of a 2013 increase, and the discovery of yet another increase in 2014, to those prepared to struggle through the fine print of his proposals.
In accompanying documents, the UK Government spelt out that for the Caribbean, the tax in economy will increase from the 2012-13 rate of PS81 (US$123) per person to PS83 (US$126) from April 1, 2013; and will then rise to PS85 (US$129) from April 1, 2014. In premium economy or higher classes of travel, the tax respectively moves to PS166 (US$252) from April 1 this year to PS170 (US$258) after April 1, 2014. The increase contrasts with the tax in the lowest band for short-haul travel from Britain. This remains unchanged at its present level of PS13 (US$19) for 2013 and 2014; in effect affording preferential treatment for those who travel to Europe.
What seems to be happening is that the tax has become a huge money-making exercise for the UK government, irrespective of the economic consequences for regions like the Caribbean or those who have family ties to the region. As if in evidence of this, the Office for Budget Responsibility, the independent body that produces statistics on the UK's economic growth, published alongside the budget a forecast figure that suggests that total APD revenues received by the UK Government are expected to rise from PS2.8 billion (US$4.26 billion) in 2012-13 to PS3.8 billion (US$5.78 billion) by 2017-18.
In the Caribbean, there has been anger. The president of the Caribbean Hotels and Tourism Association, Richard Doumeng, in noting that visitor numbers to all Caribbean destinations from the UK are falling said: "That there has been yet another increase in APD rates damages the Caribbean economy at just the moment when it needs more visitors to enable economic recovery." The tax was, he observed, particularly harmful to the ability of Caribbean people living in Britain wishing to return home. "The increase means that a family of four travelling to the region will soon be paying around US$517 in APD before the ticket cost and other surcharges are added," he observed.
Reaction, too, from those in the travel industry in the UK to the continuing year-on-year increases has been direct. In a joint statement, the chief executives of the parent company for British Airways and of Virgin Atlantic said that the planned rise in APD beggared belief. "We are very disappointed that the government's tax on flying, already the highest in the world, will increase yet again this year and next," they said."
What is shocking is that it is not as if the UK Government does not have independent evidence that the tax is damaging to the Caribbean.
Statistics from the Caribbean Tourism Organisation shows arrivals out of the UK to the region as a whole at 0.9 million in 2012 compared with a high in 2007 of 1.4 million and contrasting with increasing arrivals last year out of other EU markets and the US.
What all of this means is that if Britain's coalition government is ever to be encouraged to remove the discriminatory nature of the tax, a new and more joined-up approach is required.
Jamaica and other nations in the region with large communities in the UK together with enterprises with a vested interest in travel and tourism need to identify ways to actively support the Caribbean community in the UK to campaign politically.
In this respect, one of the most important changes that has occurred in Britain since the last election is the realisation by its politicians that the outcome of the next general election in May 2015 may be decided by minority communities voting in marginal constituencies.
There is, therefore, the strongest case for all concerned parties to now argue, in a joined-up way, that the tax discriminates against Caribbean people; that the Caribbean should be rebanded at the same level as the US; that the cost of doing so would be minimal; that all political parties in Britain need to recognise the damage the tax is causing to family and government-to-government relationships; and that all MPs who represent Caribbean people in the UK need to stand up and be counted on this issue.