Saturday, February 24, 2018

CARICOM disappointed as Britain refuses to budge on APD tax

Caribbean Community (Caricom) chairman Dr Kenny Anthony has expressed disappointment that the United Kingdom has "opted to retain its discriminatory approach" in dealing with the controversial Air Passenger Duty (APD).

Anthony, who is also the St Lucia prime minister, had written to the British Chancellor of the Exchequer George Osborne on the "deleterious effect" the controversial United Kingdom Air Passenger Duty (APD) 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 affect 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 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 recognize 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.

Anthony said it is interesting "that the United Kingdom opted to retain its discriminatory approach in the implementation of the APD.

"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.

"In weighing up the case for reform, the Government recognised that no banding structure would be entirely free of anomalies and that a revenue neutral move to a two or three band system could not be achieved without a rise for passengers flying to band A and B, some 90% of total passengers."

The Chancellor agreed that the "links between the UK and St Lucia are important for both countries, especially given the large Caribbean Diaspora in the UK, for whom air travel is an essential means to visit friends and family."

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

The Caricom chairman said "given the Chancellor's response, it is now for Caricom countries to consider their options and to take the issue to another level."

The World Travel and Tourism Council (WTTC) said new research shows that removing the APD would result in an additional 91,000 British jobs being created and 4.2 billion (US$6.5 billion) added to the economy within a year.

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

They said 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.