The International Air Transport Association (IATA) urged Iceland to drop its proposed EUR 1.53 tax on passengers departing the country in a strongly-worded letter submitted to the Icelandic Parliament.
“The proposed tax on tourism makes no sense to an economy that is struggling to recover from the impact of the global financial crisis,” said Giovanni Bisignani, IATA’s Director General and CEO. “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,” said Bisignani.
IATA submitted research to the Icelandic Parliament which showed that tourism is extremely price sensitive. Increasing the cost of flying by 10% results in an 11% fall in price-sensitive visitor arrivals. Iceland is expecting to see growth in its tourist market from 600,000 to 1 million within a few years. “Any new tax would be a body blow to the tourism industry that could slow the projected growth at a time when the economy can least afford it,” said Bisignani.
About 26,000 jobs (15.5% of the working population) and ISK 238 billion in economic activity (14.7% of Iceland’s GDP) is supported by tourism. But the World Economic Forum’s Travel and Tourism Competitiveness Index ranks Iceland’s price competitiveness at 128th out of 133 countries.
“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,” said Bisignani.