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Scottish Report Backs Halving Air Passenger Duty

by Robert Lee, Tax-News.com, London

11 March 2015


A new report commissioned by Edinburgh Airport claims that halving Air Passenger Duty (APD) could create nearly 4,000 jobs and add GBP1bn (USD1.5bn) to the Scottish economy by 2020.

Power over APD-setting powers is set to be devolved to the Scottish Parliament under an agreement brokered by the Smith Commission in the wake of the "no" vote in last September's independence referendum. Under draft legislative clauses published in January, the Scottish Government would be free to make its own arrangements with regard to the design and collection of any tax intended to replace the APD. The Scottish Government would be required to reimburse the UK Government for any costs incurred in "switching off" the charge.

According to Edinburgh Airport's new report, the Scottish Government's proposed 50 percent reduction in APD could provide an annual boost to the Scottish economy of GBP200m. The report estimates that 700,000 additional passengers would pass through Scotland's airport in 2015, rising to 800,000 in 2016 and 900,000 in 2020. The impact on tourism expenditure could be between GBP56m and GBP68m a year.

The report also argues that, were APD not reduced, Scotland could lose one million passengers a year. By 2020, the current rates of APD would cost the Scottish economy up to GBP68m in lost tourism expenditure each year.

The airport's Chief Executive, Gordan Dewar, said that ministers must now provide a timetable for the reduction of APD, to allow airlines and the tourism industry to plan for the change.

He said: "We've long argued that APD is a tax on Scotland's ability to compete with European airports of our size, and our economy is footing the bill in lost jobs and lost opportunities. It's also damaging the ability for our passengers to travel and to take advantage of the amazing connectivity we have from Edinburgh."

"Our report shows that the economic benefit of a reduction will outweigh any lost tax revenues. It's therefore reasonable for passengers, airlines, and the tourism industry to have some certainty on when this regressive tax will be reduced, and to know whether it will eventually be scrapped."

The ruling Scottish National Party welcomed the report. Commenting on its behalf, Colin Keir, the Member of Scottish Parliament for Edinburgh Airport, said: "This excellent report by Edinburgh Airport, which shows that the impact of reducing APD in Scotland by 50 percent will initially support 800 new jobs and create millions for the economy, is most welcome and must be taken seriously by the UK Government."

"The tourism tax [which] is particularly damaging to Scottish airports should be cut at once. Devolution of APD would be a game-changer for Scottish airports. The Scottish Government has committed to cutting Air Passenger Duty once it is devolved and that responsibility cannot come soon enough for passengers and Scotland's airports."

TAGS: tax | air passenger duty (APD) | aviation | United Kingdom | tax rates | tax reform | trade association | trade | Europe | Scotland

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