The Caribbean’s Air Tax Problem

Above: St Thomas (CJ Photo)

By Alexander Britell

ST THOMAS — On a recent visit to Liat.com, a ticket from Antigua to neighbouring St Kitts cost $108.00.

With taxes and fees, however, the price jumped almost 70 percent — an addition of $72.05.

It was even more dramatic on the return flight the next day from St Kitts: a base rate of $94, and taxes and fees totaling $97.65.

It’s clear that the Caribbean aviation sector has a tax problem. And the impact goes far beyond the price of tickets, according to Peter Cerda, vice president for the Americas at the International Air Transport Association.

Speaking to attendees at the Caribbean Tourism Organization’s State of the Industry conference in St Thomas this week, Cerda pointed out the crucial role of the aviation industry to tourism, the region’s largest economic driver.

Indeed, tourism and the aviation support some 140,000 jobs and contribute roughly $3.12 billion, or 7.2 percent of the Caribbean’s GDP.

And that makes the region’s high air taxes that much more impactful.

“Aviation taxes increase the cost of travelling to the Caribbean and make the islands less competitive relative to other destinations,” Cerda said.

For the Caribbean region as a whole, he said, every dollar of ticket tax could lead to 40,000 fewer foreign passengers; $20 million of reduced tourist expenditure and 1,200 fewer jobs, according to Cerda.

He pointed to two Jamaican airports, in Montego Bay and Kingston, which recently proposed airport tariff increases of more than 100 percent to attain a return of capital of around 20 percent a year.

“Measures such as these do not encourage or support the development of the industry in the region,” Cerda said. “The regulators must act strongly and swiftly against such big increases. Governments have to foster positive business environments through consultation with the industry and transparency in order to ensure win-win situations for all.”

Cerda was echoing the call of new LIAT CEO David Evans, who has since his appointment urged the region to reconsider its aviation taxes.

Writing in Caribbean Journal last month, Evans said that, for every $3 spent on air travel in the Caribbean, $1 goes right into government treasuries.

“I have argued that a reduction in taxation on aviation would increase demand and actually increase the tax take back to the governments,” Evans wrote.

But if the region wants to continue its push to be the number one warm-weather destination on earth, it will need to change things in this area.

“The issue of taxes and charges in the region transcends the formal breaches of global standards and recommended practices,” Cerda said. “The simple truth is that this region is a very expensive place for airlines to do business.”