Most of the Caribbean tourism groups have claimed the recent change in the Air Passenger Duty (APD) as ‘a complete victory’ for the Caribbean. The ‘victory’ is hardly ‘complete’, if it is a ‘victory’ at all.
Essentially, the British Chancellor of the Exchequer, George Osborne, has eliminated bands C and D from the APD application. There are now only two bands, A and B. Band A covers Europe and Band B now covers all long-haul flights. This new policy will take effect from 15 April 2015.
Flights to the Caribbean from Britain will fall into Band B and this means that the level of the APD applied by the British government will be reduced. However, the unfairness of the procedure for measuring the APD will still apply, and that is one of the crucial factors about which Caribbean governments and authorities had complained bitterly.
The unfairness is that the APD is measured from London to the Capital city of the destination to which an aircraft is flying. Therefore, passengers on flights to Jamaica, Barbados or Antigua will pay an APD rate that is higher than passengers flying to more distant destinations such as Los Angeles or Hawaii. The reason is that the APD on all flights to any part of the US, however distant, is calculated only to Washington.
Given that, when the APD was introduced, it was justified as ‘an environmental tax’, the higher taxes on destinations in the Caribbean that are shorter than longer flights to far points in the US, reveal its disingenuousness. Pure and simple, the APD was introduced as a revenue measure. In 2012/2013, it brought £2.9 billion into the British Treasury.
But the earnings from the APD may have cost the British economy more in lost revenues from tourists to the UK who opted to go elsewhere because of the effect on the tax on the cost of their airfares. For instance, Dale Keller, chief executive of the Board of Airline Representatives UK, said “The government has finally acknowledged what the industry and business knew all along – that the highest rates of aviation tax in the world were a brake on driving the UK’s economic growth with emerging markets”.
In other words, the British government’s decision in adjusting the bands was motivated much more by its domestic financial welfare than as a response to lobbying from external interests, including the Caribbean.
A coalition of groups campaigning against the APD in the interest of British Tourism told the British Chancellor earlier this year: “We believe strongly that increases in three of the four APD bands, and year-on-year rises in the APD take are making the UK economy increasingly uncompetitive”.
British Air Transport Association also pointed to actions taken by Britain’s nearby competitor nations: “Germany has frozen its equivalent tax and the Republic of Ireland has scrapped its version”.
Britain’s national Tourism agency, ‘VisitBritain’, says that tourism is Britain’s fifth largest industry, supporting 3 million jobs and over 200,000 small and medium sized enterprises as well as contributing £127 billion to the country’s GDP each year. Therefore, the British economy needs tourism and the APD applied to tourists from long-haul destinations such as China, India, Japan was restricting an increase in their numbers.
The British Prime Minister, David Cameron, has publicly stated that tourism “is one of the best and fastest ways of generating the jobs we need so badly”.
So, while Caribbean Tourism bodies are right to have fought as hard as they did for a change in the APD and this will help to ease the strain on British tourists coming to the Caribbean, the region should recognise that the British government was acting in its interest, not theirs.
Further, getting a reduction in the APD charged by one of the destinations from which tourists travel to the Caribbean is a mere scratch on the surface of a deeper problem with Caribbean tourism that needs a holistic and urgent approach if the industry is to expand and thrive for the benefit of Caribbean economies.
Here is a statement made by a Prime Minister: “We’re going to be a government that understands the huge potential of our tourism industry, that gets tourism and that gives the industry the backing that it needs”. That statement was not made by a Caribbean leader whose country depends on tourism for more than 60 per cent of its GDP – as is the case now in most of them. It was made by the British Prime Minister in relation to Britain.
In the Caribbean, tourism is increasing to two destinations – Cuba and the Dominican Republic. Such growth as the English-speaking Caribbean counties has witnessed has been marginal and not sufficient to create the number of jobs or earn the extent of foreign exchange that they require.
Realistically, Caribbean tourism is in the doldrums despite the best efforts and deep commitment of leaders of regional organisations such as the Caribbean Tourism Organisation and the Caribbean Hotels Association.
There is an urgent need for new thinking by all, but especially by planners and decision-makers in Caribbean governments. The tourism plant in the region requires rejuvenation and reinvigoration – and this applies not only to large resorts, but also to small and medium-sized hotels; there also has to be a complete re-think of incentives provided by governments to enterprises in all aspects of the industry on a common basis throughout the region in order to achieve the high level of product development that is absolutely necessary; issues such as safety have ratcheted-up the scale for priority attention, and so, too, has the matter of service – a deeper, more psychologically educational approach should be adopted; expanded and more comfortable airports are useful, but they will quickly become white elephants if the more important aspects of tourism with which the tourist interacts once in the county do not match or surpass the facilities offered by competing countries.
Recognition by Caribbean governments that reduction or elimination of their own myriad taxes imposed on air fares would also boost tourism would be an immediate benefit.
Then, there is the matter of overseas representation both at the diplomatic and tourism levels. Since tourism contributes more than 60% to Caribbean economies, its vital importance demands that the region’s best people be in the forefront of its advancement – the purpose and composition of all overseas representation should also be tackled as part of ‘re-thinking Caribbean tourism’.
(Sir Ronald Sanders is a Consultant, Senior Fellow at London University and former Caribbean diplomat)