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Report: Scrap APD To Boost UK Economy

by Robert Lee, Tax-News.com, London

11 June 2015


Abolishing Air Passenger Duty (APD) could boost the UK economy by 1.7 percent and lead to the creation of 61,000 jobs by 2020, according to a new report from PwC.

In 2013, British Airways, EasyJet, Ryanair, and Virgin Atlantic commissioned PwC to conduct an independent assessment of the likely impact of abolishing APD. In May 2015, PwC was asked to update this study following the publication of new supporting evidence by the Airports Commission and public policy changes.

The UK imposes APD of GBP13 (USD20.07) on short haul flights and GBP71 on long haul flights that depart from airports in England and Wales.

PwC concluded that the repeal of APD could boost UK gross domestic product (GDP) by around 0.5 percent in the first year, and by 1.7 percent by 2020. Airlines would invest to offer new routes and maximize existing capacity to meet an estimated ten percent increase in the demand for flights. There would be a seven percent net increase in foreign inbound tourism passengers by 2020, equating to approximately 200,000 extra inbound tourist arrivals in the UK.

PwC also found that more tax revenue would be raised from other taxes than would be lost. There would be a net increase in tax receipts of GBP570m in the first fiscal year and GBP2bn by 2020 the report says.

Carolyn McCall, Chief Executive of EasyJet, said: "Abolishing Air Passenger Duty would boost the UK economy by supporting tourism, investment, and business activity. There is a real opportunity with this for the UK to be more competitive. The Government has already removed the tax for children and we hope that it will abolish this tax completely, helping to make travel more affordable for all passengers."

Willie Walsh, IAG Chief Executive Officer, commented: "APD is an out of control tax. The Government just keeps piling on increases. Despite compelling evidence, the UK Government continues to cling to the notion that short-term gains in taxation trump long-term gains in economic growth and productivity. It is short-sighted and continues to erode the UK's standing in a global economy."

TAGS: tax | investment | business | air passenger duty (APD) | aviation | gross domestic product (GDP) | United Kingdom | tax rates | tax reform | services

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