Dear Editor,

LIAT Airlines has been a vital factor in the commercial and tourism life blood of the Caribbean for decades. However, the company has now had three CEO’s and two Acting CEO’s in the last seven years, evidence of LIAT’s challenges.

Commentary on its unfathomable financial strategy, its lack of published accounts and its, arguably, unnecessary and hugely expensive fleet replacement is already well published. The perception over many years of poor operations management, ineffective marketing and gross over staffing has made the LIAT brand a liability, rather than an asset, in the international airline world. I will not add further here to the list of woes.

Given the ongoing expansion of three competitor airlines in the Eastern Caribbean, it is possible that LIAT will soon succumb to private sector competition or, maybe, a merger can save it. In any event, one significant challenge remains for LIAT and its competitor Caribbean based airlines.

To quote David Evans, LIAT’s newly departed CEO, “I can give you many examples of journeys around the region where the tax on the ticket is the same amount as the ticket.” Evans continued, “We will sell you a ticket for US $100 dollars in LIAT but you will actually pay US $200 for it because the other $100 will be tax. That’s an extreme example but by and large 40 to 50 per cent of all the tickets that we sell, that proportion is the amount of tax so that’s a major issue.”

The tax situation Evans refers to above is one of the more obvious examples of Caribbean governments targeting the “stay-over” visitor as part of their attempt to balance budgets in these continuing difficult economic circumstances. The various airline ticket taxes place a significant financial burden on business people travelling between the islands and on tourists from within and outside the region. The result is that the volume of Caribbean inter island air traffic has declined steeply over the last decade and the law of diminishing returns surely applies to the associated tax revenues.

A similar situation exists with Caribbean hotels, where several governments in the region have again increased hotel occupancy taxes, imposing a direct additional cost for those same “stay-over” visitors - business people and tourists. Hotel room taxes now average well over 10 per cent across the Caribbean. Given the very high operating costs of hotels, particularly for smaller properties on the smaller islands, any additional occupancy tax cannot be absorbed within their room rates. The overall tax burden is part of the reason why there is a significant lack of re-investment in many Caribbean hotels with a consequent reduction in their level of competiveness in an ever tougher global market place.

Under financial pressure, many governments have reduced their tourism boards’ destination marketing budgets, which also most directly impacts the smaller hotels and the smaller islands. By contrast, Sandals remains successful because of its high budget direct consumer marketing and its economies of scale, although even that company has had to implement some cost reduction strategies over recent years.

At the same time, on most Caribbean islands, hotels represent the largest percentage of private sector employers and, consequently, drive the largest part of income tax revenue and national insurance contributions. The hotel sector is also a significant generator of government revenue from import duties, corporation tax, property taxes and VAT (where applicable). “Stay-over” visitors spend significant amounts of money on hotels and restaurants – revenue which is quickly and widely dispersed throughout an island economy. Many economists might argue that, as the largest earners of foreign currency in many islands, hotels should enjoy greater fiscal benefits as an “export” industry.

With justification, Caribbean governments will argue that they are under enormous pressure to balance budgets and need to increase tax revenues in order to provide an adequate standard of public sector services to their citizens. However, there is one obvious target where tax revenue could be increased from a sector of the tourism industry, other than the “milk cow” of the Caribbean’s hotels and airlines.

That sector is the cruise line industry, which currently makes a much lesser direct economic contribution in most islands than the local hotels and airlines.

Cruise lines have transformed their business model in recent years – larger, more cost efficient ships with more onboard facilities and lower ticket prices. These changes have resulted in 82 per cent of the discretionary spending of a cruise ship passenger now being captured onboard. That change, combined with shorter stays in ports and lower budget passengers means that many cruise passengers avoid hiring a taxi ashore and they spend much less money in island shops, bars or restaurants. Over the last two decades cruise lines have increased their share of shore excursion prices from 10 per cent to 50 per cent, resulting in a further decrease in local island company revenue.

Through this transformation in their business model, cruise lines have become hugely more profitable, operating high occupancies on a year round basis – winter in the Caribbean’s high season, summer in Alaska or the Mediterranean. Cruise ships operate in a virtual no tax / low tax “offshore” financial environment with lower build costs and operating costs than an equivalent Caribbean resort. However, no Caribbean government in recent times has increased the level of port taxes on cruise ships.

The very low port taxes currently levied in the Caribbean total only 12 – 15 per cent of the cruise ticket price and that percentage total is shared between the governments of all the islands visited on any particular cruise itinerary, say, 3 per cent per port. Compare that low percentage with the 100 per cent tax burden imposed on almost half of LIAT flight itineraries and the average 10 per cent+ for hotel room taxes per night.

Three multi-billion dollar cruise line corporations own over 80 per cent of the ships visiting Caribbean ports. They are tough negotiators and employ skilled public relations people. Every Caribbean government would need to come together, maybe through Caricom, to negotiate higher port taxes but the cruise lines can afford to pay more. Ports in Alaska, New England, Canada and Bermuda have all negotiated higher rates in recent years. On New England / Canada cruise itineraries, port taxes can represent up to 33 per cent of the cruise ticket price.

Today, around 60 per cent of the world’s cruise ships spend the winter in the Caribbean. In spite of the cruise lines’ bluster, currently there is no alternative to the Caribbean for them - a winter cruising area with a high level of differentiated tourism infrastructure and port facilities, located close to North America and Western Europe, which are the major outbound cruise markets.

No sane person wants to see cruise ships leave the Caribbean but the cruise lines could, and should, make a greater contribution to Caribbean government tax revenues. A rebalancing of the tax burden would assist the Caribbean’s own airlines and hotels to improve, expand and achieve a greater level of economic sustainability.

Robert MacLellan

Editor’s note: Robert MacLellan is Managing Director of MacLellan & Associates, the Caribbean’s leading hospitality and tourism consultancy since 1997. He has a Master’s Degree in International Hotel Management and previously held board level management positions at major companies in the hospitality, cruise line and property industries. MacLellan is a regular speaker at the CHRIS and CHICOS annual Caribbean hotel investment conferences. For further information contact Robert MacLellan:

This email address is being protected from spambots. You need JavaScript enabled to view it.

www.machospitalityconsultants.com

Dear Editor,
After the nonsensical press release of the UPP on Tuesday, which we must admit left us as a board a little confused, we would think that the UPP and independent members would try to save face by making a serious effort to work in the interest of the people. We mean, a project that is clearly in the best interest of education and our youth, for the UPP to try to turn it into a political stunt is a show of desperation.
The performance of this government is worrisome to the opposition, as comparisons would show that in less than 6 months, this NA-led government has been able to execute projects and make decisions, not to mention pass a balanced budget, while the UPP-led government was unable to get a single thing done in over a year.
With government making progress to move into the Government Building in a few months, the opposition saw it fit to ask for a meeting to discuss the plan Prime Minister William Marlin and Minister of Finance Richard Gibson put in place. Asking for clarification is the job of Parliament and we applaud efforts of Opposition to request clarification when necessary. However, it would be prudent that if you call for a meeting to ask for clarification that you at least wait until the meeting is over before walking out.
To ask questions of the Prime Minister and to leave when you realize that there is nothing wrong with the agreement with APS / SZV and Government, but that out-of-the-box thinking has led to Government not only moving into the building and saving millions in rent and significantly reducing governments debt to APS / SZV.
The Prime Minister is famous for his win-win-win agreements and this seems like another one. The Opposition must agree since they were so convinced of the agreement that they didn’t even wait for the Prime Minister to answer.

Team National Alliance
#SXMFIRST

Dear Editor,

Universally it is an accepted concept that governments are instituted to foster and regulate the development of a country by legislation and standards that allow those, who work diligently and aspire to do so to reach their greatest potential. Unfortunately, no one seems to have let our government- past or present- in on this country before self-ideal.

Don’t be fooled that politicians use the saying more or less as cliché their actions speak volumes. It would seem that before 10-10-10 and after our people continue to have the unenviable task of trying to get our government to offer a path to a better future and hope that our children would have a country to inherit or call their own.

We have seen and heard of the many abuses of the working class in this “country” and strangely enough, government seems at a loss at how to attack the pressing issues. As we are aware, unemployment is very high and unscrupulous employers and investors hire and fire at will. There continue to be no intervention from government unless it’s to favour the employer in the case of the casino, and now the ghost companies that are supposedly losing money to people choosing to save a buck by purchasing online.

Government is aware and has been aware of the instances of TELEM, a government- owned company using all kinds of creating and illicit means to circumvent our labour laws and employ illegal outsiders. This very action doesn’t only prevent our people from putting food on the table, but also robs government’s coffers of much-needed revenue.

In the past, a group of Surinamers were recruited and brought in to do work that locals could and should be doing, but the taxpayers’ company refused to grant locals the job. Though under another administration, the company is busy again according to the SMCU union, only this time they are using Jamaicans. As our hotelier friends and financiers do regularly.

And I am told immigration and labour inspectors are giving the union the royal run-around. Don’t be fooled, that is not by error or a result of departments not knowing their areas of competence. I submit that the minister in charge allows this to happen so the company can carry out the project without having to employ locals, and later put it in a study to see what went wrong.

I am at a loss for words on how else to make it clear this government and those before it don’t care for our people. Examples abound with the school bus drivers, the teachers, casino workers and many others. Since only the people can save the people, maybe we should consider action to correct what is an ongoing dereliction of duty on the part of government.

Before they succeed in putting us all on the beggar line or worst, let’s take concrete action to secure our own existence and the future we wish for our children. There is so much talk about this economy and how sensitive it is. But think for a moment, are we to believe we built an economy to benefit outsiders while we beg for bread?

It is time to stop being afraid and stand up and be counted. I put it to you nothing short of direct action will guaranty tangible and effective change. In this case being the friendly island just won’t hack it.

Elton Jones

Dear Editor,

It is hard to understand why President Obama did not push the Justice Department to seek prosecutions of those wealthy individuals who clearly have engaged in criminal activities.

The Justice Department advanced all kinds of reasons why corporations such as J.P. Morgan and HSBC which made billions on risky and yes, fraudulent transactions, all of which contributed to the big recession in 2007, should not be prosecuted. First, they argue that corporations, unlike people, cannot be jailed. Yes, all too true, but the Supreme Court in the Citizens United case held that corporations were persons under the Constitution, thus entitled to First Amendment Rights which include making unlimited donations in political campaigns, but apparently none of the detriments the rest of us face because they are not considered in the criminal settings to be persons. Furthermore, they could be at least fined upon being convicted criminally.

They also express concerns that no one person in a corporation can be singled out for prosecution because the fraudulent conduct was performed jointly by several people, ignoring the concept that if individuals conspire together to engage in fraudulent transactions, this is definitely a criminal conspiracy.

Finally, they say that bringing criminal charges against a company could lead to the insolvency of that company. What about the situation of a person in a criminal matter being put into insolvency? No concerns about that.

J.P. Morgan’s profits were so large that it was able to promptly pay the US $13 billion civil penalty assessed against it for its role in the mortgage fiasco and yet cannot financially endure a criminal prosecution?

But then we have the case of 29 men who died in an explosion, fuelled by methane and coal dust, on April 5, 2010, at the mine operated by Massey Energy in West Virginia. A ream of evidence uncovered shortly after this event revealed that Massey’s CEO, Don Blankenship, now age 65, once a major power in the coal industry, was able to obtain forewarnings of surprise visits from the Federal mine safety agency, that he ignored safety directives and hid violations from that agency; was assessed some 369 violations in a 12 year period; threatened workers with discharge if they complained about safety issues; and spent huge amounts to influence local elections in West Virginia.

To demonstrate how, apart from the explosion, lack of basic safety requirements contributed to on-going health problems of Massey workers, 71 per cent of the workers at the mine where the explosion occurred were found to have black lung disease, compared to 3.2 per cent nationally.

Finally in October 2014, the US Attorney in West Virginia filed charges against Blankenship and trial was scheduled for January 2015, but was postponed by the presiding judge at the request of the defendant. Trial did not actually start until early October of 2015 and lasted two months during which time vast amounts of evidence showing safety violations was presented.

On December 4, 2015, the jury returned a verdict of guilty of the charge that Blankenship had “wilfully violated work place safety,” but acquitted him on two other charges, one being that he gave false statements. During trials, jurors are not told about the severity of the various charges and in this case they did not know that their guilty verdict was for a misdemeanour with a sentence of only one year, whereas the two other charges were felonies with sentences up to 20 years in prison.

Blankenship was sentenced to the one year on April 6, 2016, six years and a day after the explosion. Survivors of loved ones killed in this terrible explosion were horrified, aghast and angry. Jurors were heard to lament that their guilty verdict turned out to be only for a misdemeanour. Justice denied in another branch of the government.

Stephen Hopkins