Friday, October 9, 2009

Economics 09/10/2009: A small win for free trade?

Per our stockbrokers report this am: government commissioned report from the Tourism Renewal Group stated that Minister Lenihan should repeal the Air Passenger Departure tax because of its damage to the tourism industry.

In what was termed, by the Irish Times editorial a 'Gurdgiev-Ryanair' (Irish Times editorial term) campaign (see here) sane economists and industry participants have waged consistent analysis-based factually grounded argument against the tax-driven protectionist scheme that was conceived to support domestic tourism. The scheme, harking back to the dark age of protectionism was aiming to force more Irish people to stay at home instead of traveling abroad. It did not work. Instead, the numbers of Irish people vacationing at home has continued to decline, while the number of foreign visitors to this country has collapsed - tourism is now down 20% in Ireland, while tourism is down under 10% across Europe. More businesses clawed back on international travel amidst recession. All decisions, on margin, were not helped by a completely gratuitous Departure tax.

The Tourism Minister (I am not sure why even have one) now says that the government “will consider its response within the wider context of fiscal sustainability”.

Bloxham's description of the tax effects: "the domestic tourism industry has been disemboweled by a consumer recession, strong euro and this Monty Python air tax... Someone replaced their brain with an abacus to invent this moronic tax (aping the UK) for an island economy dependent on tourism. It requires an adult to stop it. Instead of considering, fiscalising and consulting the Minister needs about one minute to conclude that this regressive tax, that harms lower income passengers most, deserves the boot. It might even re-ignite services to Irish airports, some of which (Cork ?) appear to have been hit by a neutron bomb (undamaged and pristine buildings, no people)."

One fact: the BAA reports a -5.7% year-to-date decline in volume in September at its seven UK airports, compared to 15% decline in Dublin Airport traffic to August 2009 (here).

'Gurdgiev-Ryanair' campaign check-mate to a ridiculous tax policy? One hopes.

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