Calls for “Dynamic Tax” to address high cost of air travel

A top player in the tourism sector is calling for a dynamic tax system to address the high cost of air travel within the region.

The President of the Caribbean Hotel and Tourism Association (CHTA) Nicola Madden-Greig is the one making that recommendation.

She told those at the IATA Caribbean Aviation Day in Grand Cayman recently that the new tax would serve as a novel and potential solution to address ongoing concerns about the high cost of air travel within and to and from the region.

Madden-Greig said one of the major constraints facing Caribbean travel is the heavy burden of taxation, and governments could well consider successful revenue management tactics employed within the tourism and aviation sector.

She did say however that the new may be challenging, but the CHTA president suggested a tax policy that is responsive to international travel demand seasonality.

“For example, governments can affix a higher airline ticket tax in the peak winter season and lower taxes in the summer when demand is weak but giving consumers better prices to drive visitation during the slow season could boost tourism, commerce and intra-regional VFR (Visiting Friends and Relatives) travel,” she said.

Therefore, she said the economics of such a variable policy may in fact result in a net gain in tax revenue to Caribbean governments. “As travel becomes more affordable and we stimulate more travel, this will result in more local spending, and consequently an increase in local tax collections,” she said, underscoring there will be an overall net benefit to the consumer thanks to lower ticket prices.

“I think it’s a concept that should be explored,” said Madden-Greig, who argued that a well-developed strategy could address diverse perspectives on taxation. “There’s a way to do it that allows for flexibility so you still have taxation on the front end, but when you need to drive demand, you can reduce those taxes and make up the difference on the tail end,” she said. The taxation details however must be transparent, she warned.

Madden-Greig, the Jamaica-based Group Director of Marketing & Sales at The Courtleigh Hospitality Group, said she hopes to explore the “dynamic taxation strategy” at the upcoming Caribbean Travel Forum, taking place at CHTA’s Caribbean Travel Marketplace in San Juan, Puerto Rico, October 3 to 5, 2022.

“This could definitely answer the call for reduction in taxes, but not a reduction necessarily all year-round,” the CHTA president explained, suggesting that policy makers could consider alternate tax regimes for regional and international flights in order to drive multi-destination and intra-regional travel.

She admitted that research is required on the technological options to implement the system: “It may not be an immediate solution, but it’s a solution we can work towards.”.