Posts Tagged ‘Tourist tax’

Calls to abolish passenger tax

Rarely do the chief executives of the main airlines operating in Ireland see eye-to-eye but today, Christoph Mueller (Aer Lingus) Michael O’Leary (Ryanair) and Geoffrey O’Byrne-White (Cityjet) are on an united front in urging the government to get rid of the €10 passenger tax for every traveller leaving from an Irish airport.

Ireland is a small island country, and to get away anywhere at all, we either travel by ferry (to UK and France) or by flight. We don’t have the luxury like our neighbouring European countries to hop around the continent by rail or by car directly. But the competitive air travel market has enabled us to travel in and out of the country very easily, and at a reasonable price. Most of the time anyway.

Dublin Airport

Last year, approximately 23.5 million passengers used Dublin Airport as their travelling hub. The tourist tax that’s currently in place would have generated €235 million for the government without further ado.

However since the introduction of this tax on 1st April, the number of passengers using Dublin airport have fell by about 3 millions. Assuming a linear model of projection, by the time the tax scheme operates for a full year, approximately 6 millions passenger losses will have taken place. That’s about 1/4 of last year’s number! Such a large scale drop in passenger number must be worrying for the airlines which are already struggling with high operating costs, increasing debt burden (alright, mainly Aer Lingus for now) and diminishing profits. Not to mention, this will actually also affect government’s taxation income when these companies simply aren’t posting that much profits that are taxable.

Hence the dilemma – is there a balancing point between the two? The government needs to generate revenue somehow given the state coffer is in a dire state. Yet at the same time, they cannot afford to alienate travellers at times of economic downturn. This country does not have bountiful natural resources to see through the hard time, but it does have a reasonably buoyant travel industry to keep things going.

Nonetheless, the passenger tax must not be cited as the main reason for the drop in the number of travellers passing through the airport. We are facing a worldwide recession right now, and many people simply are not inclined or cannot afford the international travel right now. Staycation is on the rise, not just in Ireland, but elsewhere too. Not only the Irish are not going away for holidays, tourists from abroad are also not coming to Ireland. Add on the horror stories from the past couple of years that earned the moniker “Rip-Off Ireland”, any wonder if the tourists are cautious about making Irish holiday plans when their dollars/pounds/yen etc could stretch further if they go somewhere else.

On top of it all, the economic downturn also takes it toll on businesses, that many are simply not travelling for work like they used to in order to cut down the business costs. Instead they turn to conference calls, voice calls (like Skype) and networking sites (like Twitter) to conduct their business and to market themselves.

Perhaps if the government deem that they really cannot afford to scrap this tax altogether, how about reducing it? Already examples are being cited for countries that have scrapped similar passenger taxes (Belgium and Netherlands) or reduced the charge (Spain, Greece) in an effort to stimulate tourism. Now, on a parting note, it would be interesting to see if the US is really going to start charging $10 entry fee per person, supposedly to fund tourism promotion costs.

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