Taxes and travel, a combination affecting Caribbean tourism

Antigua and Barbuda Tourism Minister Henry Charles Fernandez has a simple message for the Caribbean government.

He wants regional leaders to be as committed to regional interconnectivity as they are willing to pay international airlines to fly to their often “half-empty” countries.

“And so, we have to convince our leaders and by extension our people who put our leaders and ourselves there, of the importance of this regional connectivity,” Fernandez said, amid the ongoing debate in the Caribbean. on the taxes that regional governments impose on the aviation sector and visitor arrivals

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Fernandez made his position known by participating in a panel on “multi-destination tourism” as part of the Caribbean Tourism Organization (CTO) Business Meetings and the Caribbean Aviation Day Conference. Caribbean held last week.

The event was jointly organized by the Barbados-based CTO, the Cayman Islands government and the International Air Transport Association (IATA).

Fernandez, who also has ministerial responsibilities for economic development, said it is unacceptable for Caribbean governments to pay an American carrier to fly to their country, “often half empty, but then say I have nothing to put in a regional carrier…

“There has to be a commitment that we have to do it. We have to do it,” Fernandez said, noting that “everything costs money, but we have to look deeper into what happens when people travel through the islands.

But he said that despite this situation, the region must be willing to consider whether lowering taxes would mean more visitor arrivals, which would mean even more money from visitor spending.

Economist Marla Dukharan, who also took part in the roundtable, said government ministers are best placed to say whether their countries can afford to cut aviation taxes, and if so, by what percentage.

She said, however, that there are already “pockets”, such as the ABC islands – Aruba, Bonaire and Curacao – as well as Dominica, Martinique and Guadeloupe, which have multi-destination tourism.

“You’ve got what’s going on and maybe that could be the answer – small pockets versus one big pocket… It’s really about what we have to lose. Let’s look at that rather than also looking at what we have to gain.

Dukharan said the Caribbean is “the most open region in the world” in terms of exports as a percentage of gross domestic product (GDP) and “for this reason our economies are so heavily dependent on connectivity, air connectivity and maritime”.

But she noted that the Caribbean is also the most tourism-dependent region in the world.

“And so, for that reason, for the tourism sector, we have to address this problem,” she said, adding that according to the Caribbean Policy Research Institute in Jamaica, in 2019 the tourism sector contributed directly to a third of the region’s GDP. , 53% of total exports, 43% of total employment and 40% of informal employment, noting that 40% of all employment in the Caribbean is in the informal sector.

“So this sector has to work well,” Dukharan said, adding that the Caribbean is also the most expensive tourist destination in the world.

To illustrate, the economist said she went to the travel site Expedia and picked a date at random – October 23-29.e – and looked at flights from Barbados to various destinations.

“We have over 30, 40, and in some cases more, percent of the total ticket cost that is just taxes,” Durkaran said, adding that it’s “just a piece of the pie, but it’s is an important part of the pie”. .

“It’s something that we absolutely need to address in this region, because it seems to me that instead of being a race to the bottom, we are a race to the top when it comes to taxes in this region,” she said, adding that regional air connectivity is important not only for tourism, but also because the region is the most open in the world.

“We really have to think very seriously about this tax structure…And the ones that are most profitable are the ones that have to bear a relatively larger share of the taxes than the ones that are the least profitable when you tax the ticket,” Dukaran said. . , adding that she did not know what sector it was – whether it was aviation or accommodation or something else.

“You tax everyone in the destination the same whether you are a taxi driver or a five star hotel – and that makes no sense. And so, that’s something that I think we need to fix: the progressive nature of the tax system as opposed to what I consider to be a regressive tax system. »

Jamaican Tourism Minister Edmund Bartlett acknowledged that the discussion on taxation was an important discussion that was long overdue, recalling that in 2010 there was a discussion in the Cayman Islands focusing on convergence in the northern Caribbean .

He told the panel that tourism is a highly consumer-driven business.

Bartlett said global economies that relied on minerals, oil and other commodities are turning into tourism.

“Dubai is your best example,” he said, adding that Saudi Arabia is spending huge amounts of money creating the Red Sea and neon products to build Jeddah “in a way that you never imagine”.

Bartlett said the coronavirus (COVID-19) pandemic has given the Caribbean an opportunity to reinvent tourism.

“I’m not saying that taxes should be eliminated. I say taxes need to be reconfigured. In other words, instead of putting the tax on the visitor before he arrives, in other words, tax the import, tax it when it comes like the export because it’s consumption.

The new CTO chair, Cayman Islands Tourism Minister Kenneth Bryan, said he didn’t think it was “right that we put all the pressure on my fellow politicians.

“There are other stakeholders in the room who also have to compromise here, because we have to take care of our constituents.”

Bryan and his new CTO Board Chair, Rosa Harris, the Cayman Islands’ chief tourism officer, were present last Wednesday when IATA Vice President for the Americas Peter Cerdá said travel and tourism in the sector needed “more than just good-sounding words and statements.

“We need action,” Cerdá said at the Caribbean Aviation Day conference as he made a case for marketing the region as a one-stop destination.

Barbados Tourism Minister Lisa Cummins feared that 56% of the cost of a plane ticket to Barbados was made up of taxes, even as she sought to explain the reason for the situation.

“But let’s break down where the fees and charges go in the country because the things we want and the things we need to be able to provide it with a price. This helps support airlines where we have incentive programs and cooperative marketing programs in source markets,” she explained.

Cedar says flying from Port of Spain to Barbados, taxes and fees are 40% of ticket prices. In comparison, Lima, Peru to Cancun, Mexico, another beach destination, taxes and fees are only 23%.

Cummins suggested that “maybe” taxes should be reduced.

The Cayman Islands tourism minister said the pocket system can work by lineage, for example, noting that Dutch, English, French and Spanish are spoken among the 24 CTO member destinations.

“And I personally think – just my preliminary analysis – that this pocket-sized approach is probably what’s going to be best. And then the big hubs can work together.”

But Bartlett said it’s important to understand what’s needed to make sure a multi-destination strategy works.

“First of all, on the public sector side, we, the ministers, the politicians and then, of course, the private sector because the product must also be created.

You cannot have multiple destinations just by trying to connect. Connect to what? We must therefore develop a Caribbean product because there is a marketing dimension to all this. And so the private sector teams need to come together to create a product now with a price so that we can package it and go to market together,” Bartlett said.

CMC/

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