Speaking at the Caribbean Tourism Summit and Outlook Seminar held in Jamaica last week, the Director of Planning for JetBlue Airways, David Clarke, criticized the recently announced taxation of the Jamaicantourism industry, from hotel rooms to flights.
"Taxes are a really big deal. If the price of air travel goes up, the demand for it goes down," said Clarke of Jet Blue, which recently launched flights from Fort Lauderdale to Kingston. "Every time tax is added, it reduces demand, it reduces seats."
The new taxes include US$20 on travel tickets to Jamaica originating outside the country, as well as a room tax between $US1 to $US4, (depending on the size of the hotel), per room, per night.
In the Caribbean, the tourism industry employs one in eight persons and in Jamaica alone, it employs one in four, contributing to a quarter of the economy. With every 35 tourists entering Jamaica, one job is created.
With one sector making such a huge contribution to the economy, is it then destructive to levy taxes on such a "golden egg?" Will these taxes ultimately discourage visitors, leading to a decline in the industry?
Illustrating the potential harm of such a tax is the now failed Air Passenger Duty (APD) tax imposed on travelers by the United Kingdom, which was also raised at the Summit. A recent increase of this tax has caused uproar in the industry worldwide. And according to head of the World Travel & Tourism Council (WTTC) David Scowsill, the APD has caused more harm than good for the UK economy.
"Removal of the ADP would result in an additional 91,000 British jobs being created and £4.2 billion added to the economy in 12 months," says Scowsill. If Jamaica proceeds with similar taxes on airfare and hotel rooms, could the scheme have a similar negative effect in Jamaica as it did in the UK?
Wise leadership must be applied. Despite the challenging regional financial situation, tax policy must not choke the region's crucial revenue earner. Therefore everything must be done to encourage tourism, not deter its growth.