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CARICOM disappointed at Britain's response on APD

Published:Thursday | November 15, 2012 | 12:00 AM

Caribbean Community (CARICOM) Chairman Dr Kenny Anthony has expressed disappointment that the United Kingdom (UK) has "opted to retain its discriminatory approach" in dealing with the controversial air passenger duty (APD).

Anthony, who is also St Lucia's prime minister, had written to the British Chancellor of the Exchequer George Osborne about the "deleterious effect" the controversial tax is continuing to have on Caribbean economies.

The APD, instituted in 1994, is a British environmental tax aimed at offsetting aviation's carbon footprint. In its initial stage, it was set at £5 (US$7.85) per person.

Regional governments have been lobbying London to remove the tax, which they said negatively affects the growth of the tourism industry since the Caribbean has been placed in a band that makes travel to the region much more expensive than travelling from London to the United States.

Anthony said that he had received a response from the British government official, which he described as interesting in one respect.

"The Chancellor, more or less, confirms that the APD was introduced primarily to raise revenue to tackle the deficit in the United Kingdom," Anthony said.

"In your letter you recognise the fiscal challenge that the UK faces and so I hope you will understand that the government remains focused on tackling the deficit in order to protect the UK economy from global instability and secure sustainable long-term growth. Air passenger duty makes a vital contribution to the public finances and it is important that revenues from the duty are maintained,' Osborne wrote.

Unfair and unjustifiable

Anthony said that "in my letter, I drew to the attention of the chancellor that it was unfair and unjustifiable for travellers from the United Kingdom to the United States to pay a lower duty than travellers from the UK to the Caribbean, when, for all practical purposes, the United States and the Caribbean are in the same geographical zone".

But Osborne replied: "You refer to revenue-neutral solutions for changing the structure of the APD in your letter. As you will be aware, changes to the banding structure were considered in detail within the consultation.

He indicated that the UK government "cannot carry out another extensive consultation on APD, but will continue to monitor the situation".

Earlier this year, a number of leading international airlines, including British Airways, EasyJet, Ryanair and Virgin Atlantic, urged Osborne to suspend the planned APD, pending the outcome of an independent study of the economic effects of such a tax rise.

The airlines said that the eight per cent increase introduced in April would reduce passenger numbers and hinder the UK's economic recovery.

They said that as a result of the increase, a family of four flying from the UK to the Caribbean would have to pay close to £400 (US$625.08) in taxes. In 2005, such a family would have paid a total of £80 (US$125.06) in taxes.