Thu | Aug 17, 2017

IATA writes to Henry on air travel taxes

Published:Friday | May 27, 2016 | 5:39 AM
Sangster International Airport
Henry
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A taxation study conducted by the International Air Transport Authority (IATA) concludes revealed that a removal of aviation taxes would yield significantly high passenger benefits for Jamaica.

The study to be made public this weekend estimates for the Caribbean that a removal of aviation taxes could generate US$8.5 billion in consumer and wider economic benefits for the region up to year 2035.

“Tax removal can potentially deliver a GDP benefit of $3.2 billion and employment growth of 51 thousand jobs,” IATA’s area manager for the Caribbean, Annaleen Bobb, said in a letter to Jamaica’s Minister of Transport and Mining, Mike Henry, seen by the Financial Gleaner.

And if passenger-based charges are also reduced, the total discounted benefit will increase to $12 billion, said the IATA executive in her letter, which was copied to Minister of Tourism Edmund Bartlett, Minister of Finance Audley Shaw, Secretary General of the Caribbean Tourism Organisation, and president of the Jamaica Hotel and Tourist Association, Nicola Madden-Greig.

Bobb’s letter comes on the heels of the recently announced 150 per cent increase in Jamaica’s departure tax by from US$14 to US$35.

Finance Minister Audley Shaw projects that the increase in the departure tax will generate an additional $5.3 billion of revenue for Jamaica.

The JHTA and other interests have gone on record with their concerns that the increase could end up hurting the travel market.

Referencing the IATA study, Bobb said a number of outcomes have been identified that would be positive for Jamaica.

“Removal of taxes in Jamaica would lead to the second highest per passenger benefit behind the Dominican Republic,” she said, citing the study, which also identifies Jamaica as one of the countries where the relative GDP benefit will be highest if taxes are reduced or removed.
The report adds that Jamaica together with Dominican Republic and Haiti stand to benefit most from employment growth if taxes are reduced or removed.

The IATA executive in her letter suggested that, overall, taxes discourage travel and reduce the connectivity of regions at the expense of economic development in those regions.

Regarding the impact the increase in ticket price could have on travel and tourism, Bobb said passengers are likely to choose alternative destinations with no equivalent tax or will just be dissuaded to fly.

She argues that while air transport is the cornerstone of the global economy, in recent years aviation has been burdened with excessive taxes to fund state functions and generate public revenues, “while other modes of transport such as cruise ships, whose passengers’ onshore spending may be as little as one-tenth the consumption of stayover visitors, remains relatively untapped”.

IATA represents just over 260 airlines that comprise 85 per cent of global traffic, including all major carriers operating in Jamaica and has the support of the Board of Airline Representatives of Jamaica (BARJ).

BARJ chairman Yvonne Pearson said the departure tax increase would definitely have a serious impact on the travelling public.

Taxes paid by travellers through Jamaica’s main tourism gateway pay lower taxes overall. Passengers departing the Norman Manley International Airport in Kingston pay an average of US$114 in government taxes, in comparison with Sangster International in the resort city of Montego Bay, where the taxes amount to US$106.

Compared to its competitors, Cayman Islands, Aruba, Turks and Caicos and The Bahamas, travellers to Jamaica pay more taxes overall.

janet.silvera@gleanerjm.com