Increased departure taxes could see Belize’s tourism arrivals plummet
I am writing to add another voice to concerns raised by tourism industry professionals throughout Belize regarding government’s amendment to increase the airport departure tax.
The Governor General signed the PACT (Amendment) Act into law on March 31sr after it was previously voted down by the senate. This amendment to the PACT Act introduces an additional fee – a “development fee” of $32.50BZ which is to be levied and collected from every non-Belizean person departing from any air border point. The whopping new departure fee of $118.50BZ now results in the second highest departure tax in Central America.
Since 1981 Chaa Creek has grown alongside Belize’s tourism industry and now directly employs 160 Belizeans while providing revenue for a host of other businesses and workers throughout the country. Like many of our tourism partners, we continually monitor the global travel industry, participate in international seminars and workshops, and have developed a highly visible marketing presence.
My husband Mick and I recently returned from Berlin, where Chaa Creek was awarded first place honours at National Geographic’s World Legacy Awards for “Engaging Communities”, and it is this aspect – the effect that this amendment will have on the people and communities of Belize, that I wish to address.
It is no secret that tourism, as Belize’s primary employer, drives the national economy. And it didn’t come about by accident or luck. The industry’s dramatic rise in such a competitive global industry was the result of continual monitoring, constant attention to customer satisfaction and a striving for excellence that lead to a deep understanding of our markets and customers. Considering this, one would think that the government would look at Belizean tourism professionals as an invaluable resource to consult when formulating policies that impact upon such a vitally important yet inherently fragile industry.
This is the case in successful tourism destinations around the world, where the private and public sectors work closely together in developing policies and strategic direction. But, sad to say, that has not been the case here in Belize with the legislation to increase the departure tax.
While every destination is to a degree unique, we all share the same global market and customer base, so it is useful to look at the experience of other countries who have increased their departure taxes.
The Netherlands conducted the most comprehensive review of the effect of departure taxes on tourism after they instituted, and then withdrew, their short-lived “Air Passenger Tax” – short lived because it proved to have a disastrous effect on their travel industry.
The Dutch government levied a departure tax of €11.25 for European destinations and €45 for long-haul routes. The result? For one year, from July 2008 to July 2009, Amsterdam’s Airport Schiphol recorded a net loss of approximately two million passengers, leading the Dutch government to repeal the tax. Their research found that half of those two million chose to fly from airports in other countries, while the remainder opted to not travel at all.
After the departure tax was removed, air transport grew rapidly, with Schiphol airport recording record passenger figures in 2011. In total, despite the effects of the global financial crisis, total air passenger figures rose from 22.8 million in 2010 to 25 million in 2011 after the repeal of the departure tax.
Holland is a wealthy nation with a strong private sector that generates income in many areas, such as oil and natural gas, exports of cheese, dairy and agricultural products, manufacturing and more.
Now consider a similar situation in Belize, where our revenue and employment eggs are pretty much in one basket – tourism. While the Dutch could weather such a dramatic downturn in travel and then bounce back, Belize would be hard pressed to do so, with the hardship being worn by the many workers and their families faced with a sudden downturn in tourist arrivals.
And the Dutch experience has been replicated in other nations across the world. Malta repealed their departure tax in 2008, followed by Ireland, Mexico and other countries, including the UK, where the government reduced its Air Passenger Duty for long-haul travel from April 2015.
Australia recently voted down an increase in their departure tax, with a highly researched Australian Tourism Industry submission “Joint Review of Border Fees, Charges and Taxes” noting that:
“The impact of these charges cannot be underestimated. Air travel is price-sensitive and the cost of an airline ticket is the first trigger in the decision process that leads to travel. In fact, the price sensitivity of air transport has increased in recent years…Several studies demonstrate that leisure travellers are the most price-sensitive and that demand is reduced by the introduction of any new tax on airline tickets that pushes up the price.”
There is plenty of information about the detrimental effect that departure taxes have had on tourism across the world. Our concern here is with the effect this can have on the families of Belizeans who have worked so hard to develop a tourism industry and international reputation that is the envy of many.
Consider the following scenario, applying the lesson that Holland and other destinations learned at such a cost:
The GOB raises the departure tax, and many travelers, especially those travelling with families or in groups, add up the costs and decide either to go someplace else or vacation in their own country. As tourist arrivals drop off, resorts, hotels, restaurants, tour operators, guides, suppliers and many more begin to cut back on staff, putting many people out of work. Demand for goods and services across the board drops.
As in Holland and those other countries, the government realizes their mistake, and eventually repeals the increase. However, unlike other nations with diverse revenue streams and strong social safety nets, the damage in Belize is severe and takes much longer to recover from. In addition, Belize, with a much smaller marketing budget than other destinations, finds that repairing the damage to its reputation takes much longer, for, as any marketer knows, tarnishing a reputation is much easier than repairing one.
Nations such as Cuba, Costa Rica and Mexico absorb those tourists no longer coming to Belize, and the country continues to languish because, once travelers find a destination too expensive, or feel they are being taken advantage of, they will not only stay away, but will spread their displeasure through word of mouth.
As a major employer of Belizeans with close ties to our local communities, we find this prospect deeply disturbing. The people responsible for raising the departure tax will not find their livelihoods and families disrupted, but tens of thousands of ordinary, hardworking Belizeans will.
Tourism is not a fat cash cow able to withstand endless milking. It is a fragile industry in a volatile marketplace that needs nurturing and care if it is to remain sustainable and productive. To treat it otherwise is to put thousands of families at risk and threaten our collective quality of life and national security.
With the stakes so high, and impacting so many people, we don’t think it’s unreasonable to ask our elected officials to please stop and consider, consult with industry professionals, and work together with us to develop coherent policies that take a long term view, rather than short term grab-the-money-and-run strategies.
The economy and people of Belize deserve nothing less.