Reduction in Government Taxes and Fees on Intra-Regional Caribbean Travel

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The issue of Taxes, Fees and Charges (TFCs) in air transport has been a source of controversy globally, not least in the Caribbean Region. The region is heavily dependent on air transport to support the tourism industry, but high and increasing TFCs have contributed to the decline in intra-regional travel in recent years. A 2007 InterVISTAS’ study which conducted an extensive literature review spanning twenty-five years concluded 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 markedly more expensive since the majority are passed onto passengers. Analysis 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 and other regional airlines. Numerous studies using Price Elasticity of Demand (PED) have predicted that if governments were to reduce TFCs, intra-regional Caribbean travel will increase significantly. 

Moreover, 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 outweighs the foregone TFC revenue. 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 different taxes in the economy over time (E.g. Sales Tax/VAT). Instead, CARICOM Governments have turned regional airlines into major tax collectors and pushed the cost of travel beyond the reach of many Caribbean citizens. 

Sign this petition as we seek to put pressure on CARICOM Governments to re-evaluate the current TFC regime on intra-regional travel. Over-taxing regional travel is counter-productive to regional connectivity and the growth and productivity of our economies.