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Britain ‘s Air Passenger Duty TAx

Britain ‘s Air Passenger Duty tax: A disaster for the Caribbean

Britain ‘s Air Passenger Duty tax: A disaster for the Caribbean
Image via reuters.com

By By Robert Kelly, eTN Staff Writer | Nov 24, 2009

Britannia may no longer rule the waves but its imposition of the November 1 Air Passenger Duty (APD) tax has sent shock waves across the Atlantic that will wash up on Caribbean shores with a devastating effect on the Caribbean tourism industry.

In spite of massive lobbying from home and abroad and objections from airlines, tour operators and tourism organizations including the Caribbean Tourism Organization (CTO), the British government went ahead with its plan to impose the allegedly "green" and controversial Airport Passenger Duty (APD) aimed at taxing aviation's "carbon emissions."

CTO secretary general Hugh Riley called the air passenger tax " illogical and one that will damage tourism to the Caribbean."

Meanwhile, British Airways, which is greatly increasing service to the region this winter, has denounced what it calls "these huge tax hikes," warning "it was bad news for holiday makers and completely unjustified."

It is a sentiment that the Association of British Travel Agents (ABTA), which launched a petition on its website, agrees with. ABTA spokesman Sean Tipton in a BBC Radio interview said, " It’s impact would be felt in Britain, the Caribbean and elsewhere."

And Brian Deeson CEO of the Pacific Asia Travel Association (PATA), has said the UK government's decision to raise taxes from British airports is "shortsighted and self-defeating."

Virgin Atlantic also voiced its opposition to the tax, predicting that the increases will hurt the aviation industry, the British economy, the Caribbean and other developing countries.

To add a historical perspective to this universally despised tax, one has to go back to 1994 when the UK government originally introduced the APD which comprised a flat rate on all passengers departing from British Airports at varying levels depending on the class of travel.

In November 2008, however, the government made known that it planned in the context of its annual budget, a number of significant changes by introducing a four-tier distant related system.

As of November this year, APD charges are being divided into four "bands." A, representing journeys of up to 2000 miles; B, representing flights 2000-4001 miles; C, covering trips between 4001-6000 mile; and band D, for all journeys more than 6000 miles.

With effect from November 2009 the APD payable by a visitor to the Caribbean traveling in economy class will increase by 25 percent. From November 2010, the increase will be no less than 87 percent. And for passengers traveling in Premium Economy and Business Class, the corresponding increases will be 25 percent and 94 percent respectively.

According to Mr. Hugh Riley, "These are wholly unacceptable increases at a time when our economies are struggling to maintain demand. In practical terms this means that a family of four traveling in Economy Class to a Caribbean destination, will be required to pay 300 pounds in APD alone and in Premium Economy, 600 pounds!"

Under the banding system, the amount of duty levied is related to the distance between London and the destination's capital city. This measure has the disturbing effect of discriminating in favor of the United States over the Caribbean "for reasons of administrative ease."

It does so by determining that all of the US (although oddly enough not the US Virgin Islands or Puerto Rico which are considered Caribbean) is closer to London than all of the Caribbean.

Under this impaired British logic, it is implied that the damage to the environment caused by flights to the Caribbean is more than that generated by flights to California or Hawaii. The Caribbean is banded along with the US despite being 3,000 miles further away than for example St. Kitts and Nevis, in the Eastern Caribbean.

ABTA's Head of Development, Andy Cooper said, "It's no coincidence that the United States, the country most likely to challenge these taxes appears to have benefited mostly from these new arrangements."

The ABTA official added, "Many customers will simply not be able to afford the new rates of tax and will have to change their booking patterns causing huge damage to economies which are dependent on British tourists."

Mr. Cooper called on the British government to reconsider the changes to APD or to scrap the tax altogether something that the Dutch government did in July of this year.

According to Caribbean tourism experts and government officials, the impact of the increased Air Passenger Duty on UK visitors to the Caribbean is expected to be immediate and will have a negative effect on the economies of Caribbean countries. Last year, the region received over one million British visitors or just 6 percent of total arrivals.

Many of the Caribbean destinations are highly dependent on tourists from the UK even through this economic downturn. For example, 39 percent of tourist arrivals to Barbados are from the UK, while Antigua and Grenada attract 34 and 28 percent respectively.

CTO's boss, Hugh Riley, is in total agreement that "these changes in the APD will have a major detrimental effect on tourism to the Caribbean and disproportionately affect the large Caribbean Diaspora in the United Kingdom, at a time when the projections of the CTO suggest a sharp fall in visitor arrivals for the remainder of 2009 and in 2010."

Led by the CTO, the Caribbean that stands to suffer the most from these new changes has not stood idly by but has joined many of their allies in the travel industry and the strident voices of the Caribbean Diaspora in opposing the new APD changes.

In a release to the media, Mr. Riley summarized some of the measures undertaken by the CTO. In it he stated that his organization contracted the services of the Caribbean Council to lead the Caribbean's effort to fight against the increased APD, organised Diaspora Leaders in a letter writing campaign to British MPs, published articles and conducted numerous interviews with the British media, made presentations and submitted data to the Caribbean Diplomatic Corps in London, galvanized Caribbean Leaders including the Prime Ministers of Jamaica and Barbados to visit London to direct representations against the tax hike, and conducted research on the likely effects on the increased APD on Caribbean tourism.

However, in spite of the near universal condemnation of the APD, the British government has stood firm. In a meeting with British Parliamentarians on the penultimate day of this years' World Travel Market Caribbean Ministers of Tourism were emphatically told that the measures would stay in place.

The clear message from the Gordon Brown-led British government is that the Caribbean must find a way coping with the hike and the British Treasury says it needs all the money it can get and wont repeal the measure.

But St Lucia Tourism Minister Alan Chastanet said in a BBC Radio interview that he will be in the forefront of efforts to fight "the illegal tax increase." Mr. Chastanet has also hinted that a legal challenge is one of the options being looked at in conjunction with other concerned States.

One thing is now certain: the issue of the APD and the Caribbean is far from over.

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