High airline taxes, long blamed by many regional experts for their role in a slump in intra-regional travel, may, after all, have to be lowered, a Caribbean leader has hinted.
But the realisation, voiced by Vincentian prime minister Dr Ralph Gonsalves appears to have come too late to save the inter-island carrier that some of the governments own, as the leaders appear to be coming around to the idea that the tax burden is too heavy for the region’s privately owned commercial carriers.
Dr Gonsalves, newly installed as chairman of the 15-member Caribbean Community, said he believes there is now “general acceptance” within the Caribbean for a lowering of taxes so as to encourage intra-regional travel.
The taxes account for as much as 60 cents in every dollar for an airline ticket, which often fetches higher prices for travel a few hundred miles with the Caribbean than from the Caribbean to Florida.
Regional airline LIAT, which is owned by four Caribbean governments including Barbados and St Vincent and the Grenadines, is to be liquidated, it was announced last week, after racking up debt in excess of $100 million.
But in the last decade of its life, even after replacing its ageing fleet with help from the Caribbean Development Bank, LIAT ferried one-third fewer passengers as governments targetted airline tickets for a 56 per cent increase in taxes, while the airline’s base fare grew by only three per cent.
He told a panel discussion on the COVID-19 pandemic and regional air transport, organised by the Eastern Caribbean Central Bank (ECCB) on Thursday night, that the regional governments have come to the realisation that there is a need to lower airline taxes in order to make aviation profitable.
Governments, he declared, would have to be prepared to fund the operations of their airports in the short-term.
Said Dr Gonsalves: “St Vincent and the Grenadines, we have already cut our taxes from US$40 to US$20, Grenada has announced that they are doing that.
“I know Roosevelt Skerrit, the prime minister in Dominica is talking the same thing, prime minister (Allen) Chastanet (of St Lucia) is talking the same thing, though Antigua and Barbuda has a departure tax plus this other kind of development levy or fee.
‘There is, I think, a general acceptance that we have to lower the taxes. It means that the governments will have to put more money from the Consolidated Fund in the short run to operate their airports and move into a model to make them places to do business.”
Economist Dr Justin Ram, a fellow economist said regarding infrastructure, “the airports that we have in the region are huge cost centres and it is actually one of the reasons we have high taxes and fees.
“If you think about it, for our size of population in the Caribbean, if we were a single landmass we would probably only have about three airports… but because…we are small islands we have many airports to contend with and those are quite costly. So, I think the model around airports and how we utilise infrastructure we need to change, we need to stop thinking about them as cost centres and start changing them into revenue centres”.
Dr Ram said that Caribbean countries needed to re-think their policies regarding transportation and airport development.
“I think it is time for us in the Caribbean to have a single regulator. So if, for example, I am authorised to operate out of St Vincent and the Grenadines that should give me clearance to operate anywhere in the Caribbean.
“I think this is where we need to go, and more importantly, I think having a single Caribbean airspace is critical also for the passengers. It means that once I enter the Caribbean through immigration, I should not have to go through immigration, customs, again. We really need to have one set of rules so that we have that single airspace.”
On a separate development, Dr Gonsalves, who has lead responsibility for transport within CARICOM’s quasi-cabinet, defended the decision of Caribbean countries to establish a “travel bubble” so as to encourage travel given the impact of the coronavirus on Caribbean economies.
He said: “The idea of the bubble is that really once the territories are at the same level with respect of infection and the other things… is that you would not require PCR tests upon arrival in any country which is in the bubble.”
He said once the traveller undergoes the usual tests, “you will move safely without requiring a PCR [COVID-19 swab test] either when you are leaving or when you are arriving…there would not be any quarantine either.
“This is about a management of risks, but you will have to be in the territory for 48 days, you can’t go from St Kitts to Miami and you come from Miami… to St Vincent, you will have to either do your PCR out of the USA in Miami or you will have to do it when you come in St Vincent, and there will be a period of quarantine because you would have not have been in the Caribbean territory for 14 days continuously.
“So the bubble has that defining element too.”