The International Air Transport Association (IATA) is urging Iceland not to go through with a proposed tax hike on airline passengers leaving the country, calling the idea tantamount to “killing the golden goose”.
The Icelandic parliament has proposed raising airfare taxes on departing passengers by 1.53 euros. This proposal was met with a strong reaction from the IATA, The Financial reports. In a letter from Director General and CEO Giovanni Bisignani, the organisation urged the Icelandic parliament to reconsider.
“The proposed tax on tourism makes no sense to an economy that is struggling to recover from the impact of the global financial crisis,” the letter reads in part. “Don’t kill the goose that lays the golden eggs. At 15%, the tourism sector’s relative contribution to the Icelandic economy is the biggest among Western European countries. Aviation should be nurtured as a key economic catalyst not strangled with taxes.”
About 15.5% of Iceland’s workforce is employed in the tourism industry. The IATA’s letter pointed to research which showed that tourism is very price-sensitive – increasing flight costs by 10%, for example, can result in an 11% drop in arrivals. Iceland, the IATA argues, simply does not have the competitive edge to raise airline taxes to this degree.
“Iceland has a competitiveness handicap. Don’t make it worse by adding costs with new taxes. The government’s long-term policy should be to reap the economic benefits of tourism by making it as affordable as possible to visit. Turning away price sensitive tourists with new taxes is short-sighted madness,” Bisignani concludes.