UK Chancellor To Forge Ahead With APD Rise

by Robin Pilgrim, LawAndTax-News.com, London

27 April 2009

The UK's Air Passenger Duty (APD) increases will come into effect exactly one year after they were first proposed, in November 2008, despite ardent protest from several major airlines, including British Airways (BA).

Under the regime, air travel will be split into four different tax bands according to destination. The amount of APD a passenger has to pay will then be based on which band their location falls into.

Broken down, the additional tax levies will mean that:

• The tax on long haul economy flights will rise from around GBP40(USD58) to GBP85 (USD123);
• Long haul premium economy and business class passengers will pay GBP170 (USD247) in tax; and
• The tax levied on the average shorthaul economy flight will more than double from its current GBP5 (USD7) to GBP12 (USD17).

Justifying the new rates, the government has explained that the increases are needed to maintain current carbon emission reduction targets. However, airline companies have strongly contested this view, arguing that an increase in APD (which already generates an average GBP2bn (USD2.9bn) revenue for the government annually) will simply reduce passenger numbers during the economic downturn.

BA Spokesman Willie Walsh has openly condemned the proposals, which will now add GBP280 (USD407) to the cost of a family holiday to the Caribbean or GBP360 (USD524) to Australia.

Speaking on the eve of the Chancellor's Budget, Mr Walsh said the rises in Air Passenger Duty would penalize working families, harm economic recovery and put the UK at a competitive disadvantage.

"APD was doubled two years ago, making air travel from the UK the most heavily taxed in the world," he told a City of London conference.

"The government's own figures show that UK airlines already meet their environmental costs, so there can be no 'green' justification for these additional taxes," he continued.

Mr Walsh reinforced his point by explaining that the Dutch authorities had recently scrapped a new flights tax because of the way it would conflict with wider efforts to stimulate an economic upturn.

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