COMMENTARY: Passenger tax – a tax on all their dreams

Cdr. Bud Slabbaert

What the Caribbean region needs is so simple: rapid, reliable mobility at reasonable rates. What makes it so difficult? It is almost as short and simple to explain.

There are two players; the aviation industry and the governments. The aviation industry is not really the problem. They have the equipment and the crews. They have fixed costs and calculate what is needed to make a profit. One could argue about how cost-effective they are and what is considered a reasonable profit margin. And that’s it. Yet, one should also consider the entrepreneurial risks they are taking.

On the other side, you have the governments. For one, they have no risks in the aviation operation. Just benefits. Yet, they want a random tax contribution per passenger; no particular calculation. Mind that landing fees are different than taxes, and they do have a particular justification. So, what justifies the passenger tax? Inter-island or international, it doesn’t make a difference.

Major airlines are polite to governments. They listen politely when represntatives of tourism or airport authorities are courting, or flirting, and trying to convince them to come on over. However, the operators don’t tell governments where to go; they just don’t put the destination on their schedule. Except for one airline, or rather one airline boss, who is well-known for telling anyone where to go, or in clear text expressing ‘that they can shove it’. Ryanair decided in October last year that it would drop 16 routes and 600 jobs after an Italian government’s tax hike. It would also result in 800,000 client losses according to their calculations. Their explanation: “Ryanair had no choice but to close two of its 15 Italian bases, and move its aircraft, pilots and crews to countries that have lower tourism costs. The tax increase will seriously damage Italian tourism, and it would hand a golden opportunity for growth to destinations in Spain, Portugal and Greece that have lower tourism costs.”

Governments love Low Cost Carriers because they lure tourists with low fares. Exactly for that reason, they believe that the LCC will bring the oh-so desired passengers by the masses. Yet, then they slam the air passenger duty on top of the fares, to the extent that those are nearly double. Does that make sense? So, before the passengers don’t show up and seats remain empty, the airline doesn’t open a route or terminates it. That does make entrepreneurial sense!

“Once you have tasted flight, you will forever walk the Earth with your eyes turned skyward, for there you have been, and there you will always long to return,” according to a quote attributed to Leonardo da Vinci. Anyone who is less than a genius may tell you that when the taste of flight fare turns from sweet to bitter, he will not turn his eyes skyward in all directions anymore.

Governments can argue until they turn blue or green why a passenger tax is needed or why they believe it is justified. They may even feel proud and protzy when they believe that they won the argument. However, the tourists have the last word in determining what price is acceptable for their vacation budget. Monies that had to work and save a whole year, to make their dream retreat come true. Taxes are not a dream incentive; they are a repellent. For tourists, there are plenty of options near and far in the geography, where the temperatures are warm, the platinum beaches are lined with palm trees, and where they are received with open arms. Governments can try to have it their way, but tourists for sure will find it their way…., somewhere else.

Cdr. Bud Slabbaert is the organizer of the annual Caribbean Aviation Meetup conference. He has an extensive background in aviation and business development as well as in related journalism.

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20 Comments

  1. July 25, 2017

    Long article, saying nothing. Buy a ticket in the US and it is taxed. People who travel by air will continue to travel by air regardless of the taxes, they will complain but that’s all. How many people will take a trip just because they are getting a discounted ticked? If the tourist can’t afford to buy the ticket he or she will also have negative spending power, is that the type of visitors we want?

    • Dante Jones
      July 26, 2017

      Or how about they spend the money they would spend on the over priced ticket on the local economy?Remember we‘re trying to get them in. Once they get in they will have to spend money one way or another. There is no tourist that is not a cost benefit even those cheapskate backpacking tourists have to buy food and drink. Even rich people will try to reduce cost no matter what. And it‘s not about whether they would travel or not, it‘s the fact that if they have to choose between a no name undeveloped country with exorbitant airfare vs some other country with reasonable airfare they ewill go to that other country.

      Trust me after having travelled a lot and meeting many people who travel for different purposes, Dominica right now is one of the least attractive destinations in terms of accesibility and cost of fare. We woukd do well to try to reduce at least one of those factors to make ourselves more competitive as a travel destination.

  2. Diogenes
    July 25, 2017

    Caribbean Development Bank, Inter-American Development Bank, Caribbean Tourism Organisation, IATA International Air Transport Association, and the World Tourism Organisation (UNWTO) all advice against the taxation because it causes a negative impact on economic and social development and tourism, counter-productive effect and one is less competitive relative to other destinations.

    And, don’t feel sorry about the tourists; they are just not coming. Same for the airlines. Travel agents will not put the destination in their brochures as they offer other more favorable priced packages.

    Don’t worry, just tax more to be able to spend more on tourism promotion, so that more will come.
    Will they? What is wrong here or rather who is wrong here?

    • Dante Jones
      July 26, 2017

      I doubt that those taxes are really beingnspent on tourism promotion. In the technological age that we live in media and publicity is cheaper and easier than ever. They quote these exorbitant costs for promoting the country, its tourism product and CBI program but it sounds more to me like they’re paying exorbitant salaries to people to do a job that can be acheived much more efficiently and at lower cost.

  3. The Calabash
    July 25, 2017

    Yes, poor islands looking for sources of revenue and socking it to the visitors. Like all taxes there is an optimal level.

  4. July 25, 2017

    What a fantastic essay! I couldn’t agree more. It’s basic economics that the more you tax something, the less of it you get.

    • Me
      July 25, 2017

      The law of diminishing returns.

    • Emile Dominique
      July 26, 2017

      Steve in the USA, the tax is on the ticket and is collected by travel agents travel agents. These agents make a minimum of 10% commission. So maybe the USA could drop the Tax to prevent double taxation.
      Before President Regan the cost of air travel was controlled and there was no ticket tax. With deregulation things change drastically.
      That “fantastic essay” is not in favour of the Carribean neither is the writer who does not know anything about taxation as a source of revenue. He is one of those American writers who take pleasure in demonizing the Caribbean, like Kenneth Rijock
      Something is going on which began with the 60 Minutes passport issue. someone is trying to reduce the importance of the Windward and Leeward islands as tourist destinations. This guy is not in our interest.

      • Emile Dominique
        July 26, 2017

        “The more you tax something the less of it you get” is not basic economics. a tax can be progressive or regressive and have very little difficulty for collection. Tax breaks can be used as incentives. Like supply and demand an equilibrium have to be established to prevent tax a burden.
        I don’t understand why we like to give credit to those white Americans with negative attitude towards us .We cherish them like heroes We treat what they say like gospel, but they always have a hidden motive that is not conducive to our development. I must add that there are many American who love us and understand our problems but those do not have access to the media. ” Who is not for you is against you” and that man is not for us, and anyone of us who supports him is against themselves.

      • Dante Jones
        July 26, 2017

        It’s not about who the man is but what he says and the fact is that he is right, Air travel in the caribbean is prohibitively expensive and any measure we can use to solve that should be explored

      • July 26, 2017

        Things did change drastically with deregulation: flying became affordable for everyday people:

        https://www.theatlantic.com/business/archive/2013/02/how-airline-ticket-prices-fell-50-in-30-years-and-why-nobody-noticed/273506/

        And the writer wasn’t “demonizing the Caribbean”, on the contrary he puts on an annual Caribbean aviation conference to find solutions to the transportation problems the region faces.

  5. Daryl Joseph
    July 25, 2017

    The question is are you being tax twice because part of your ticket should already have departure tax. If you look at fees from the airline it should include that tax. To my knowledge which is standard. If the government received tax payment from airlines for departing passengers then it’s has additional departure tax then that’s not right

  6. LifeandDeath
    July 25, 2017

    Good Commentary. NOw that it comes from a Blanc, maybe Gov’ts will take heed..idk how many people noticed but the Gov’t of Dominica just increased departure taxes , and sneakily put it in as part of the ticket price, at least that was done with Liat..the question is why if Dominica making so much money from other sources?..Not all that glitters is Gold..
    Where is the creativity? Where is the economic expansion? A gov’t can’t tax its way out of mismanagement of funds..

  7. Anonymous
    July 25, 2017

    These taxes must discourage people from visiting us for sure. What does government think? That all, visitors are rich white tourists to be soaked? Well, if they treat them like that they will hardly come back either. These guys are so short sighted.

  8. megso
    July 25, 2017

    I have always wondered what would happen if someone did not have the money to pay the departure tax!

    • Anonymous
      July 25, 2017

      Very good question? Perhaps they can pretend he/she works for the government and let them pass frre so as no to delay the flight? I don’t think government officials pay that tax, do they? The other thing is they always tell you they have no change and only take cash. that is so lame and an opportunity for bobol.

    • July 25, 2017

      This almost happened to me, since amazingly the tax window still doesn’t accept credit cards and I didn’t have enough cash on me. My cousin who was dropping off borrowed some cash from a friend she saw, I don’t know what would have happened otherwise. Not allowed on the flight? Deportation? It’s not hard to envision a tourist being in that situation. And even when they happen to have the cash on hand, getting soaked for an extra tax is the last thing tourists remember of their experience in Dominica. Far and away this tax is the most stupid one imaginable, and it can’t be abolished fast enough.

      • Dante Jones
        July 26, 2017

        It‘s so stupid in this day and age that they don’t accept electronic payment. Why does this separate tax even exist in the firstr place. It should already be factored into the ticket or dropped altogether

    • Diogenes
      July 25, 2017

      I have wondered about that also. How about the following scenario.
      – “I have no money for the departure tax”
      – “Then you cannot leave”
      – “But I’m a foreigner and have a limit on how how long I stay and still don’t have the money for the departure tax”
      – “Then we will deport you”
      – “Great, why don’t you deport me now on the expense of the government and I will also save the departure tax”

  9. Dominican
    July 25, 2017

    I support Cdr. Slabbaert’s stance wholeheartedly. It does not make sense for a government to promote tourism with tax payers’ money only to tax this business on the other end. It is like putting a tax on exports. Imagine we would tax the exports of our agriculture produce in Dominica? Whatever little business is left would wither on the vine, so to speak. I find it particularly odious that once you have enticed a tourist to come and spend his money here, you hold him to ransom by asking him to pay a departure tax before he can leave. That is not a friendly gesture. I think travel, certainly regionally should not be taxed to encourage people to visit more and spend money for the local economy to benefit. These taxes are counterproductive and stiffle our tourism development, There is no reason why Dominica can not be a leader for once in this respect.

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