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Opposition Builds Against UK APD

by Jason Gorringe, Tax-News.com, London

12 November 2012


Popular support for a review of the United Kingdom's Air Passenger Duty (APD) is building, with further lobbying recently spearheaded by a group of 1,300 tourism executives in support of a quantitative impact assessment of the air travel levy on the UK economy.

The business leaders have joined countless other parties in petitioning the UK government this year, all calling for the UK government to commission an independent report to investigate whether the tax is worth the damage being caused to the local economy and the UK's competitiveness.

UK APD is the most draconian tax of its type worldwide, and critics have said that the government has transformed the environmental levy into a crisis-time 'cash cow'. APD on fares has risen markedly since the levy was first introduced in 1994, from rates of between GBP5-10, to GBP13-184 at present. APD is to rise nominally in April 1, 2013, and business jets are to be brought into the tax net.

The Office for Budget Responsibility projects that tax revenues will increase from USD2.8bn in 2011-12 to GBP3.9bn by 2016-17. However, new research by the British Chamber of Commerce estimates that APD will cost the UK economy GBP10bn in lost growth and up to 250,000 fewer jobs over the next 20 years, and cause the UK's competitiveness to fall and the UK aviation industry to contract.

A recent survey undertaken at Stansted Airport, in support of the 'A Fair Tax on Flying' campaign, found that over half of 1,000 fliers surveyed are to limit their travel where possible to short-haul destinations, to avoid the prohibitively high taxes in place on long-haul destinations.

The campaign against APD has seen 100,000 air travellers contact their local Member of Parliament, and representations from countless tourism and business organizations.

The industry's campaign appears to be gaining support among policy makers too. The Scottish government is considering abandoning APD in favour of lower aviation taxes after a study by York Aviation found that the territory had lost 1.7 million air passengers in recent years as a direct result of the levy, costing the local economy some GBP210m annually.

UK lawmakers are backing the cause. A survey undertaken during May-June 2012, found that 51% of 150 lawmakers supported a reduction in APD rates to increase the UK's international competitiveness and encourage economic growth; and the All-Party Parliamentary Group on Aviation has urged the government that it must immediately rethink the nation's aviation strategy.

TAGS: environment | tax | business | air passenger duty (APD) | fiscal policy | aviation | United Kingdom | tax rates

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