Thursday, July 18, 2013

Bahamas: Tourism Chief Confident On Aviation Tax Solution

A senior Ministry of Tourism executive yesterday expressed optimism that all parties would be “able to work” through the commercial airline concerns over new and increased taxes, and reach “a position tenable to all”.

David Johnson, director-general of tourism, told Tribune Business that the Ministry was seeking to strike a balance between this nation’s airlift and fiscal needs, and hopeful it could obtain “a clear indication” of where things were headed by week’s end.

Declining to go into specific proposals advanced by the Ministry of Tourism, Mr Johnson indicated that the talks now awaited the Government’s and, more pertinently, the Ministry of Finance’s position.

Tribune Business previously revealed how the Airlines for America (A4A) coalition, which represents the main US carriers serving the Bahamas, such as Delta, Jet Blue and American Airlines, had warned its members might cut back on services to this nation as a result of the new and increased Customs fees.

This newspaper understands that the Ministry of Tourism is leading efforts to avert any airlift loss, and Mr Johnson confirmed as much, while adding that the initiative also involved other government ministries.

Emphasizing that the Ministry of Tourism “works very closely” with the airlines in a partnership approach, and understood their concerns, Mr Johnson told Tribune Business: “We feel we’ll be able to work through this.

“That’s our attitude to this, and we’re busy working on it. We’ve informed the industry we’re embracing this. We’ve shared with them our views to wok through this, and reach a position that is tenable for all.”

Acknowledging that the commercial airline industry’s position on the situation was well-known, Mr Johnson indicated the only clarification awaited was the Ministry of Finance’s views in light of the concerns raised.

“I’m hopeful we can get a clear indication by the end of the week from our side, the Government side,” he told Tribune Business. “We know we’re in a position, fortunately or unfortunately, where we have to bridge market demands and, as we have, we have to be responsible, managing this in the best interests of the Government.”

Acknowledging that the Ministry of Finance had the responsibility for managing the Government’s fiscal position, and collecting revenues/setting taxes, Mr Johnson would not be drawn on whether it should have consulted both its Tourism counterpart and airlines before implementing the increased aviation taxes.

“We’re at where we’re at, and have to move forward with all parties,” he said, adding that other countries did not consult with, or forewarn, industry before implementing new or increased taxes.

“It’s more important that we grapple with this development in a constructive way, and realizing all parties have varied interests here, we want to get the optimum result for the country,” Mr Johnson said.

“It’s a work in progress. It’s just work that has to be done at a high level. We’re being constructive in our approach to this.”

The Government, in the form of Ryan Pinder, minister of financial services, had previously indicated they would not revise the new aviation tax regime. Their position is that the increases were necessary to cover Customs’ costs in providing certain services.

However, both the commercial and private aviation sectors have hit out at the increases and the way they have been implemented.

All flights are now being charged $75 for both arrival and departure, for a grand total of $150 per flight, along with increased Customs service charges for planes arriving after 5pm, and before 9am, on any given day.

Commercial aircraft with a seating capacity of less than 30 are being charged $50 per hour; airliners with seats numbering between 31-70, $100 per hour; and those with 71 seats or more, $200 per hour.

And A4A’s members also expressed concern over Customs’ new 1 per cent administrative processing fee, which will be added to brakes, tyres and other aircraft parts imported to the Bahamas for repairs. This fee, capped at $500 per import, replaces the previous $10 Stamp Duty levy.

A June 28, 2013, letter to Customs Comptroller Charles Turner from A4A warned that its members “may be forced to reconsider their service levels to the Bahamas”. It expressed particular unhappiness at the late notice provided by Customs to the airline industry of the tax /fee increases.

Keith Glatz, Airlines for America’s (A4A) vice-president of international affairs, warned Mr Turner in no uncertain terms that the new charges threatened his members’ “exceedingly slim profit margins” and could “undermine the desire to stimulate the Bahamas’ economy”.

“A4A’s members want to maintain and grow, where demand warrants, their operations to the Bahamas,” Mr Glatz told Mr Turner. “Higher taxes will not encourage A4A members to grow their service to the islands.

“With exceedingly slim profit margins and the inability to recoup the taxes and fees that they pay directly to governments, airlines may be forced to reconsider their service levels to the Bahamas.

“The proposed fees may have unintended consequences and undermine the desire to stimulate the Bahamian economy”.

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