Chief Executive Officer of interCaribbean Airways, Trevor Sadler, is concerned that Jamaica could see a decline in its tourism numbers relative to Cuba, as a result of the Government’s imposition of an additional US$20.47 on departure tax from the island.
In May, Minister of Finance Audley Shaw, in an attempt to fund the promised $1.5 million tax break, increased taxes on cigarettes, petrol and departure tax. But the decision to increase the departure tax was heavily criticised by Opposition spokesman on Finance Dr Peter Phillips and the Jamaica Hotel and Tourist Association, which warned that such a move would reduce Jamaica’s competitiveness as a tourist destination.
During a familiarisation trip to Cuba held by Turks and Caicos Islands-based interCaribbean Airways, Sadler noted that Jamaica, because of its geographic closeness, was seen as the original leader in hotels and tourism for residents of the United States and Canada. But that title has been taken over by the Dominican Republic which has more than doubled its tourist arrivals.
“One of the most recent things that has changed how people view Jamaica as a tourist destination is its unenviable position of being the tax leader in the Caribbean by far. The recent increase on international tax to US$35, is only one of I believe seven different taxes that are levied on a tourist coming or going to Jamaica,” he told said.
“So according to our system-based verification on taxation, a tourist coming to Jamaica is going to pay in round numbers US$128 in taxes. A little bit next door we have the Dominican Republic which is also a little bit higher than some of the other countries — approximately US$88 per person, so you’re looking at US$40 difference between a tourist coming to Jamaica and going to [the] Dominican Republic, simply in taxes alone,” Sadler continued.
He added that for a family of four visiting Jamaica, it would cost roughly US$160 in additional taxation; enough to get a tourist family travelling to Cuba an additional three or four nights’ stay in casas particulares – a private bed and breakfast guest occupancy.
“With Cuba next door to Jamaica – less than an hour – the departure tax in total is US$25. Compare that to roughly US$128 just to leave from Jamaica, and if you consider cheaper houses to stay like the casas particulares, while the price points can vary to up US$38 per night, I could have more nights in Cuba just from my savings on taxation,” the CEO told the
Caribbean Business Report. “It also means I will drop more money into the Cuban economy because I’m going to eat and spend.”
Sadler is now calling on the Government to review the taxation measures that currently govern the tourist industry.
Cuba, though in the process of liberalising its bilateral relations with the United States, has seen an increase of 17.3 per cent last year, bringing its tourist numbers to 3.5 million. According to the World Bank, the Spanish-speaking country has also experienced growth of 77 per cent in tourists arriving from the US. That number is expected to significantly increase once the trade embargo is lifted.
“So Jamaica has to consider how it can realise its revenue gains not by simply penalising the international tourists, because the tourists or the airlines will react to this by reduction,” Sadler said.
“The hoteliers who are building are going to step back and consider, am I investing in the right country? Of course as the airline provider I need to have customers who are willing to fly to Jamaica and who are willing to pay that number.”
He is concerned that the tentative approval of 10 commercial flights from the US to Havana, Cuba, could put pressure on connecting flights to Cuba from Jamaica if the tax measure is not reviewed.
“The question is: Are people willing to pay more money, or will we see a reduction in passenger numbers, and then the need to reduce the number of flights we operate to Jamaica in order to compensate for the loss? I’m sure that’s a question that many airline operators are going to start asking themselves as they start to monitor the reaction to demand,” he said.
