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Nov 25, 2018 News
Over the years, the regional airline industry has seen an elevated degree of commercial difficulties– difficulties that have caused travel within the region to become disjointed, prohibitively expensive and subjected to layers of taxation.
The Caribbean Development Bank (CDB) has concluded that as a solution to the issue, countries would need to lower taxation in the aviation industry as well as to implement major policy changes that will significantly affect efficiency and regulations within the sector.
CDB also sees this as a major factor for the increase in each country’s Gross Domestic Product (GDP) and employment rate.
In accordance with the CDB strategic plan of action for “Air Transport Competitiveness and Connectivity”, countries within the region can be significantly affected in their GDP and employment rates.
The strategic plan, in an assessment of air transport within the Caribbean identified air connectivity as a critical aspect for the development of the region. A large number of Caribbean countries are tourism dependent and as such, any decline in the aviation sector can affect the economies of these countries.
However, while the aviation sector in the Caribbean accounts for just five percent of international tourism arrivals, it contributes over 15 percent to Caribbean GDP.
It was recognized that whilst the aviation sector has seen upward mobility in the number of international flights, there has been a notable decrease for intra-regional travel. This, in turn, could greatly affect regional air carriers.
Furthermore, recent surveys have concluded that the taxes on regional travel were found to be one of the highest worldwide. The correlation between high taxes on intra regional travel and a lack of intra regional travelers was proven quite evident.
It further begs to question whether the overall economic impact of the increased number of visitors would be greater than the reduction in ticket taxes. With all this being said, an increase in air services and frequencies would mean higher traffic volumes, which in turn would help to improve economic competitiveness and therefore create employment opportunities and raise the country’s GDP.
Whilst one can attribute the high airport charges in the Caribbean to the region not having economies of a certain scale, the CDB’s rationale is focused on the Caribbean’s economic capabilities. One of the financial initiatives of CDB is aimed at reducing miscellaneous tax that are levied and implementing new tax structures.
Other initiatives that have been explored include open skies agreement, harmonization of standards and implementing regional exchange policies.
Improved and more regular air connections enable economies to attract more tourists, conduct more trade and attract more foreign investment. Without these important air links, a country’s economy and employment potential could suffer.
The aviation sector currently yields $2.4 billion to the global economy.
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