A group by the name The Citizens Against High Intra-Regional Caribbean Travel Taxes is calling on the Prime Minister Gaston Browne and other CARICOM Heads of Government to respond to the petition submitted to their offices.
The petition with over 20 thousand signatures was sent to Browne and his colleagues recently.
Below is the letter written to PM Browne on the matter.
Dear Prime Minister,
This communication is born out of a regional movement of Caribbean citizens who have come together in opposition to the current cost of intra-regional travel and governments’ role in escalating airfares.
The issue of Taxes, Fees and Charges (TFCs) in air transport has been a source of controversy globally, not least in the Caribbean Region. Ours, is a unique geographic space
heavily dependent on air transportation to support the tourism industry whose contribution to the gross domestic product (GDP) of CARICOM Member States is significant and for some unparalleled. In short, tourism is a critical component of the region’s strategic development plan.
However, the increasing cost of regional travel threatens to stymie our progress. High and
increasing TFCs have contributed to the decline in intra-regional travel in recent years. A 2018 study by the Caribbean Development Bank (CDB) on regional air transportation1 found that intraregional travel’s share of total Caribbean travel declined from 15 per cent to 9 per cent between 2012 and 2017.
At the same time, travel from the Caribbean to extra-regional destination increased by 6 per cent. Despite the slight rebound in intra-regional travel during 2018 reported by Caribbean 1 Caribbean Development Bank (CDB). 2018. “Air Transport Competitiveness and Connectivity.”
2 Tourism Organisation (CTO), the cost of travel in region remains a significant impediment to connectivity and growth.
Moreover, a 2007 study by InterVISTAS2 Consulting commissioned by the International Air
Transport Association (IATA) conducted an extensive literature review of publications and
research spanning twenty-five years and concluded with overwhelming certainty that higher airfares result in reduced passenger traffic demand. In the Caribbean, this issue of cost is exacerbated by the TFCs which, when added to the basic fares of carriers serve to make overall ticket prices devastatingly expensive for passengers. Analysis in the aforementioned CDB study revealed that on average TFCs added 54% (40% from taxes and 14% from charges) to the cost of a LIAT one-way ticket in 2016.
TFCs constitute similar proportions of fares for Caribbean Airlines (CAL) and other regional airlines. For example, a recent CAL promotion to mark its inaugural direct flight from Jamaica to Barbados advertised a fare of USD100.00 round trip.
However, when TFCs were added to this fare the total cost of travel increased by USD 154.00 to USD $254.00. In this case, TFCs amounted to more than a 150 per cent increase in base fare. A break-down of the different taxes imposed by CARICOM Governments compiled from airline websites is attached to this communication for your reference.
We have always been a proud and ambitious people committed to charting a path for the
development of our respective nations.
The social contract between governments and citizens has been the bedrock of the efforts of leaders to devise strategies to realise advances in infrastructure and services for a better quality of life. A key component of the infrastructural development has
been the construction and maintenance of modern airport facilities across the region.
There is no denying that airports are expensive. Operations require adherence to complex rules and guidelines intended to meet global aviation standards, efficient and user-friendly passenger processing and baggage handling, as well as passenger facilities for commerce, dining and transit.
Staffing, utilities and other costs associated with daily operation also add to the burden on airport authorities.
Consequently, there is almost an expectation that nations implement measures to extract revenue from passengers who utilise airports across the region to contribute not only to their operation, but also to fund aspects of government budgets. For us, the questions are how much TFCs can authorities impose on the traveler before negative overall outcomes begin to accrue?
Specifically, how much TFCs can CARICOM Governments extract from intra-regional travelers before the 2 InterVISTAS Consulting Inc. 2007. “Estimating Air Travel Demand Elasticities.”3region begins to be negatively impacted by the lower passenger volumes? We believe that our region is at a critical juncture, where over-taxation while meeting airport operational costs is compromising regional development and economic integration for the worse.
Having outlined the issue, it is imperative that we now communicate the objectives of this
campaign. Hitherto, the focus has been on intra-regional travel. This is intentional. Changes to the
TFC regime applied to travel originating from and destined for outside of CARICOM is not the
focus; we are not asking governments to disrupt this income stream. Instead, our efforts are
concentrated on the lowering of TFCs on travel between CARICOM States. Accordingly, we
present cogent arguments clearly demonstrating the benefits of increasing intra-regional travel to
CARICOM as a collective and to individual nations. We believe that it also important to emphasise
that while it may difficult to disassociate intra-regional travel from the financial performance and
sustainability of airlines operating in the space, this campaign is not associated with any airline
and their quest for increased passenger volumes and revenue.
Rather, what we espouse is based on principles enshrined in the Revised Treaty of Chaguaramas
(RTC) signed by regional leaders optimistic about the manifestation of regional advancement
through genuine functional cooperation. Principles of collective responsibility and shared destiny,
principles of reduced insularity and myopia built of the realisation that by depending more on each
other, we can depend less on non-CARICOM states for our social and economic progress. This is
both metaphoric and literal, since the region’s TFC policies do not appear to recognise (at least
ostensibly) that intra-regional travel can be a direct substitute for international tourist arrivals. By
facilitating CARICOM nationals to travel within the region we can grow each other’s economies
while reducing the rate at which foreign currency leaves the region through extra-regional travel.
Numerous studies have used Price Elasticity of Demand (PED) which measures the responsiveness
of demand to changes in price have predicted that if governments were to reduce TFCs, intraregional Caribbean travel would increase significantly. Amsterdam Economics in their study aptly
titled ‘Economic benefits of reducing aviation taxes in Latin America and the Caribbean’
concluded that removing aviation taxes and fees would drive efficiency and connectivity growth
to the benefit of both the consumer and the wider economy3. It “could deliver businesses and
individual consumers in Latin America and the Caribbean USD 5.8 to 7.9 billion of immediate
direct consumer benefits, compared to a ‘do nothing scenario’. These direct consumer benefits
3 Amsterdam Economics. 2016. “Economic benefits of reducing aviation taxes in Latin America and the Caribbean”.
4
ripple through the rest of the economy and create wider economic benefits”. At the time of the
study and based on the countries included, Amsterdam asserted that removal of aviation taxes
would result in a total GDP impact of USD 87 billion and 912 thousand jobs. If passenger-based
charges are also scaled back, this amount increases to USD 135 billion and 1.4 million jobs. These
figures include all GDP and employment directly and indirectly related to aviation. While the study
did not directly include all CARICOM countries, few disagree that similar benefits would accrue
across the board.
Moreover, CDB analysis suggests that there will be short run and (larger) long run boosts to GDP
of countries that reduce TFCs. The higher the magnitude of the PED, the greater the increase in
GDP, and the more likely there will be a positive net financial impact, where additional tax revenue
generated by increasing economic activity would rival TFC revenue foregone. In other words, the
increase in travel will likely see governments collect other tax revenue similar to the amount lost
by reducing TFCs. This would manifest in the form of revenue increases from taxes already in
existence in the economy over time (E.g. Sales Tax/VAT). Instead, CARICOM Governments have
effectively turned regional airlines into major tax collectors and in doing so pushed the cost of
travel beyond the reach of many Caribbean citizens.
We therefore call on CARICOM Governments to re-evaluate the current TFC regime on intraregional travel. Over-taxing regional travel is counter-productive to regional connectivity and the
growth and productivity of our economies. It is our hope that a renewed social partnership would
be inclusive of meaningful dialogue and action with citizens engaged in this movement and our
respective governmental officials.
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Maybe a more productive petition would be one to have All Caribbean countries contribute to LIAT finance.
Maybe a combination of both?
Not to really cloud this petition’s objectives, but eventually we’re going to need another petition that calls on Liat’s shareholders to make their management start publishing Liat’s annual financial statements, preferable with an auditor’s statement. Liat’s annual financial statements should be made available to the taxpaying public. That is because there should be greater accountability – on Liat’s financial operations – to the taxpaying public whose governments pumps funds into Liat.
Is PwC still Liat’s auditor? because I am trying to pay close attention to LIAT’s bottom line, and one of the questions that I am trying to figure out is: What does LIAT retain in each dollar per passenger as profit?
Why is the taxpaying public still been kept largely in the dark on Liat’s financial performance? At this stage, LIAT’s annual financial statements should be made available to the public because of the level of funding Antigua and Barbuda pumps into Liat. Another reason is because the public has been kept in the dark consistently and for too long on financial aspects of the airline’s operations.
Going forward, at minimum, financial statements of no less than the last five years, or even 2013-2018, should be made available to the public. Even at this stage, with technology, etc. it cannot be too late to have financial statements made public for previous years.
LET’S SEE IF A&B CAN BE FIRST TO MAKE A WELCOMING MOVE!
This LIAT issue is overbearing now. The problem can be solved (my views) cut out this rebate for staff families and friends, let all the Islands LIAT serve the Government subscribe to its Service, if they don’t want too stop serving them. Why is it that only the Government of four (4) countries (which are in the miniority) must subscribe and those that do not subscribe and are being served are in the majority. Hight of foolishness.l
I am not going to argue with anyone about the high fares intra-regionally. I’m just not flying between Caribbean countries anymore.
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