Travel extortion

Britain's Daily Telegraph newspaper reports that  United Kingdom's new coalition government has planned to scrap an already onerous and controversial per passenger duty (APD) levied on all passengers departing the UK with an even more controversial per plane duty (PPD). A spokesperson for the ABTA (Association of British Travel Agents) rightly termed the move as "devastating to an industry that is struggling in the wake of a
recession and the volcanic ash crisis."  The UK's air passenger duty, currently in force, has increased over 300 % in the four years and is already at a formidable level. For example, an American looking to visit Britain will have to pony up $68.60 on a coach class ticket for the privilege of leaving the UK.  The switch to a per plane levy is sure to have a negative impact on outbound tourism affecting key destinations like New York (the Caribbean is likely to take the biggest hit given the proposed tiered structure). The UK government, like all revenue strapped jurisdictions, claims not to have a choice but like all taxes, it can only have a negative effect even in the near term as it affects both UK residents and visitors to the UK.

The UK does not have a monopoly on efforts to thwart tourism as was seen by the much trumpeted Travel Promotion Act (TPA) which stands logic on its head in its effort to "promote" the US as a destination by asking folks from visa waiver countries coming to American shores to pay a $10 fee every two years. The seemingly insignificant amount per person promises to bring in an additional 1.6 million tourists per year – all on a spread sheet, ex-ante. The promoters obviously expect that everyone will forget to do an ex-post analysis a year and a half from now after the measure has been in effect for a year. If history is any guide that certainly will be the case. The International Air Transport Association IATA has been unsparing in its criticism of the act saying "we’d love to see more people visit the United States  but we don’t think that videos and billboards are
necessarily a priority. Instead, we should be focusing on how to make
customs and immigration easier for people."  If the money were spent to offset budget cuts that have resulted in closure of parks and basic tourist facilities like toilets open, there may be some upside. 

While the TPA's ten bucks is directed at incoming foreigners there is no laying off of passengers' (both Americans and foreigners) wallets as they leave the US. Without a hint of irony, the US levies a clutch of "user" fees which include a US Customs User Fee of $5.50, US Immigration User Fee of $7.00, a US APHIS User Fee of $5.00 and a US Security Service Fee of $2.50. Thus a "free" frequent flyer domestic coach class ticket starts at $20.00 before other jurisdictions pick passengers' pockets. While considerably less than the UK's APD or Peru's $30.25 "departure" tax it is clearly non-trivial.

Alaska's governor, Sean Parnell appears to be swimming (rightly) against the rising tide of taxation when he recently hailed the passage of "Senate Bill 312, which reduces the cruise passenger excise tax from $46
to $34.50. Recognizing the significant impact the decline in cruise ship
travel has on Alaska jobs and Alaska businesses, Governor Parnell
introduced legislation that sends a clear message to cruise passengers
and the industry that Alaska welcomes visitors." Unfortunately, few, if any, are likely to emulate that worthy initiative.

Published by

Vijay Dandapani

Co-founder and president of a New York based hotel company for 24 years. Grew the firm to five hotels in Manhattan and also developed a greenfield project at MacArthur airport, New York. Speaker at numerous prestigious forums including Economy Hotels World Asia, Lodging Conference, NYU, Columbia University Real Estate Roundtable, Baruch College's Zicklin School and ALIS. President and ceo of New York City Hotel Association since January 2017.

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