Scotland Keen On UK APD Review

by Robert Lee, Tax-News.com, London

29 December 2014

The devolution of UK Air Passenger Duty (APD) to Scotland, and a subsequent review of the levy, could help the country unlock its full potential, Scottish Transport Minister Derek Mackay has said.

Last month, the Smith Commission recommended that APD be devolved to the Scottish Parliament. The Commission – set up in the wake of the "no" vote in September's independence referendum – was tasked with brokering a cross-party deal on new powers for Scotland's Parliament, Holyrood. It suggested that the Scottish Government be free to replace or remove the UK's APD regime as it sees fit.

Mackay said that, although 2014 has been a good year for route development in Scotland, the UK APD regime is impacting on the competitiveness of Scottish airports.

"UK APD is the most expensive tax of its kind in Europe and its impact on Scotland cannot continue to be ignored. Airports and airlines repeatedly cite it as one of the biggest obstacles when it comes to securing new direct international services and maintaining existing ones," he said.

According to Mackay, devolution would bring significant opportunities for airlines, airports, and passengers. He said "there is no reason why powers over APD should not be transferred to Holyrood immediately so we can get to grips with this unfair tax and allow our airports to maximize their potential."

If a new tax were introduced, the Scottish Government would have to reimburse the UK Government for any costs incurred in "switching off" APD in Scotland. A corresponding adjustment to the block grant (the portion of revenues provided by the UK Treasury each year to fund Scottish Government operations) would also be required.

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