New hare-brained tax will affect Pacific tourism

By Dev Nadkarni

The tourism industry in the Pacific region has joined the chorus of its counterparts around the world to denounce the United Kingdom’s half-baked Air Passenger Duty (APD) to bring it centre stage ahead of the elections in that country.

The tax is an excise duty charged on flying passengers from airports within the UK to destinations outside on aircraft with capacities of 20 or more seats. The tax has a cascading scale related to distance, which makes long distance flying considerably more expensive.

The taxes were introduced in 2007 but new rates have applied since November 2009 and are set to rise again from November this year. If the present plans still hold, a passenger travelling from the UK to any Pacific destination including cities in Australia, New Zealand or anywhere in the Pacific Islands will have to pay a whopping 170 pounds surcharge on their ticket price.

The tourism industry in the Pacific region has raised grave concerns over the huge negative impact this is bound to have on the entire region’s economy, calling the tax ill conceived and draconian much like travel organisations from around the world, particularly from developing countries.

Tourism is among the top three income generators for most countries in the Pacific region and is the top sector for employment in almost all of them. Long haul tourism contributes significant numbers and the industry fears this segment would be most affected by levies like the proposed APD, the Pacific Tourism Leaders Forum has said at its recent meeting in Sydney.

The announcement of the APD raised alarm bells throughout the region’s tourism sector and catalysed the formation of this forum. It comprises major stakeholders from the region’s travel and tourism industry including public and private sector operators and bodies. The forum is a broad representation of the communities the businesses serve around the region.

Participants at the forum organised by the region’s largest travel body, the Pacific Asia Tourism Association (PATA), feared taxes such as the APD would act as new barriers to trade and development within the region, given its high dependence on the tourist dollar.

The effect would be far worse if other European governments decided to adopt a similar levy in the near future, which they will probably do because of the high awareness of climate change issues there. The effect of the regressive tax would prove catastrophic for the smaller economies in the region, the forum has said.

The tax is politically motivated and is clearly the result of poor policy making. It is without doubt the fallout of the flawed thinking that has guided the largely discredited carbon economics by overzealous accountants and consultants who saw an opportunity in the worldwide alarm raised by the spectre of global warming and its supposed anthropogenic causes.

It is difficult to understand that a global economic power like the UK could be so insensitive as to come up with such a draconian tax. Come to think of it, it is just a tax and like all taxes and levies will solely serve the purpose of adding revenue to government coffers with absolutely no benefit to the environment which it purports to protect.

The move could have far more serious consequences for the economy, wellbeing, peace and prosperity of the region and could have an effect far worse on the environment that supposedly saved by flying fewer passengers over long haul destinations.

One of the attractions of the Pacific region is its pristine beauty for which it has been known for generations of travellers. The long haul tourism industry has in fact helped preserve natural environments because of the income they bring into regional governments. Threats to tourism income could well lead to pressure on natural resources as locals look to other sources of income including leveraging these resources for cash.

The effect of decreased revenue receipts from tourism in a region that depends on it in the main would devastate both the economy and the environment of particularly the smaller nations around the region. This was poignantly demonstrated by a hypothetical case study by a German academic at a recent tourism meet in Samoa to which a reference was made in the March 2010 issue of Islands Business.

The Forum has made a strong appeal to the UK authorities to reconsider the tax because of these impacts on regional economies that could have a domino effect on the world economy as well as the fragile environments of one of the world’s most pristine and exotic regions.

The effect of such a tax would be felt immediately and would delay the recovery of the region’s economies from the global recession. In the longer term, it would continue to threaten these economies and the livelihoods of millions of people across the region besides endangering the environment, the forum has said.

An instance of how a dip in long haul tourism and transport could affect the region is borne out by the fall out of the eruption of the Eyjafjallajokull volcano in Iceland last month: New Zealand, for example, lost several million dollars a day in tourist revenue since flights were grounded, to speak nothing of delays in vital freight supplies like the seasonal flu vaccines that were grounded in France.

Which brings me to another aspect of dangerous atmospheric emissions and their greenhouse effect. Though it has been widely disputed, the UK Treasury is sticking to its forecast that the APD tax measures will result in a cut by about 0.3 million tonnes a year of carbon emissions by 2010-2011, and all greenhouse gas emissions by the equivalent of 0.75 million tonnes of carbon dioxide a year.

According to sources that have been monitoring the hard to pronounce Icelandic volcano, it has been spewing 300,000 tonnes of carbon dioxide per day. If this were to continue happening across a whole year, it would have emitted some 15 million tonnes – or roughly that amounting to the annual emissions of countries like Austria or Portugal.

The 60,000 plus flights grounded since the volcano erupted apparently saved 1.3 million tonnes of carbon dioxide – a mitigation of sorts, if you will. But just suppose this volcano was not situated in the path of one of the world’s most crowded air spaces and instead was in some remote part of the world that would not have necessitated the grounding of flights.  That would have meant several additional million tonnes of greenhouse gases in the atmosphere.

The question is what in the emission control strategies that the world is dreaming up would have helped counter carbon spewed by such a natural calamity? Who would pay for such an unexpected surge in carbon dioxide and greenhouse gases? What effect would this have on targets set at world conferences to deal with the problem such as Copenhagen? Will all targets be dynamically adjusted and carbon taxes raised every time there is a surge in atmospheric carbon following every Eyjafjallajokull or – god forbid – a future Krakatoa?

First appeared in Islands Business, May 2010