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UK puts pause on further APD hikes

Efforts of Caribbean tourism heads and other international travel operators are bearing first fruit, as the UK’s Chancellor of the Exchequer George Osborne announced yesterday that there will be no increase in the Air Passenger Duty (APD)until April 2012.

“As far as we are concerned this is a good first step,”Minister of Tourism Vincent Vanderpool-Wallace toldGuardian Businessyesterday.”We would also like to see a revising downward to a newer and fairer system if the tax is to be applied.”

The minister said that the tax has been a burden on island destinations, and specifically Caribbean destinations when compared to other competing vacation hot-spots.

According to guardian.co.uk, a Treasury estimate forecast the duty was expected to earn the exchequer GBP 2.3 billion last year and would generate an additional 65 percent, up to GBP 3.8 billion by 2015.

The APD was initially billed as a’green tax’when it was introduced to the UK in 1994. Its 2009 model created four tiers which charged a duty based on how far a country’s capital city was from London. To illustrate, the result was that a traveler to Miami Beach or Hawaii paid an additional GBP 60 for an economy fair, while a traveler to Nassau would pay an additional GBP 75. Travel above economy class effectively doubled the charges.

The growth in the revenue according to the aforementioned treasury estimate would likely have come from either more passengers or increases in the levy. But for three consecutive years, according to guardian.co.uk, UK passenger numbers have been falling in the UK. Caribbean tourism leaders anticipated that any increased revenues would have been coming from additional duty.

“We were under no illusions that there were no increases planned for this year–and that there might have been in this budget even more increases intended,”Vanderpool-Wallace said.”That’s why we wanted to work very hard to try and head that off.”

The announcement that the’pause-button’had been pressed on further hikes came as a direct result of a strong lobby effort from Caribbean Ministers, Robert’Sandy’Sands, Baha Mar’s senior vice-president for governmental and external affairs toldGuardian Businessyesterday. He added that”for the first time”the industry is seeing some progress in getting the British Government to react in a favorable way on the APD.

As new products are introduced to the nations’tourism mix, the UK and European market will play an increasingly important role in the industry, according to Sands.

“When you have the likes of Sandals-all-inclusive and the Kerzners and eventually the new Baha Mar, the whole issue of having market diversification and growing existing markets will be extremely important to the continued growth of tourism to the Islands of The Bahamas,”Sands said. He added that lower airfares allowed local land-based operators more options as they did not have to subsidize travel packages, leaving them in a more competitive position compared to Caribbean destinations, who often have better linkages to Europe.

In April of next year, the’pause’button may be reset, but Caribbean tourism officials are encouraged by a statement from Osborne, who said he would look at how”to improve the existing and rather arbitrary bands that appear to believe the Caribbean was further than California.”

“Today’s announcement by the Chancellor is a small but important victory for the Caribbean,”CTO Chairman and St. Kitts and Nevis Minister of Tourism and International Transport, Sen. Rickard”Ricky”Skerritt said in a statement yesterday.

“In our various meetings with the British Government CTO opposed the idea of a Per Plane Tax for economic reasons. We also asked that the existing banding system be reviewed; for no more increases in the APD; and for it to be revised downwards in a new, fairer system. The Chancellor’s speech gives us positive results on all three points.”

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