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'Scrap APD', UK Airline Bosses Say

by Robert Lee, Tax-News.com, London

22 November 2011


The negative impact of air passenger duty (APD) on the UK economy outweighs any benefit from the revenue raised, four leading airline chiefs have said, calling on the government to scrap the levy.

Writing to Chancellor of the Exchequer George Osborne, Carolyn McCall from easyJet, Willie Walsh from IAG (the British Airways parent company), Michael O’Leary from Ryanair and Steve Ridgway from Virgin Atlantic, have challenged him to commission an independent report on the true economic effects of aviation tax in Britain.

APD was introduced in 1994 as a ‘green tax’. At present, the levy is charged according to four 'bands', which relate the tax to the distance travelled by the passenger. For a short haul flight, an economy class passenger pays GBP12 (USD18), while for a flight of over 6,001 miles, the same passenger would expect to pay GBP85. A first class passenger on the same flights would pay GBP24 and GBP170 respectively.

In January, 2007, the economy class figures sat at GBP5 for shorthaul routes and GBP20 for longhaul. According to the letter, in 2009, passengers paid GBP1.9bn in APD, a figure which rose to GBP2.1bn in 2010/11 and it is forecast to increase to GBP3.6bn by 2015. It is said that as a result, the UK now has the highest aviation taxes in the world.

In their letter, the airline bosses note that the situation in the UK mirrors what occurred in the Netherlands in 2008/09 when a similar air tax was imposed. After a year, the levy was abandoned when a study showed that its harmful effects on the Dutch economy were nearly four times greater than the revenue it produced. Designed to raise GBP300m per annum, the letter says the levy actually cost the Dutch economy over GBP1bn in the first year. It is also pointed out that tax proposals in Denmark were withdrawn for similar reasons.

The letter goes on to highlight that passenger numbers at UK airports have fallen consecutively for the last three years to a level lower than 2004. In 2010, there were 7.4m fewer passengers in the UK, while numbers using European airports grew by 66.3m. It also cites the findings of a recent One Poll survey of 3,000 people, 77% of whom said APD is an unfair tax. However, 71% were unaware that another APD rise is due in April next year.

The letter states that: “For hard-working families, APD is a tax too far for the privilege of taking a well-earned holiday. It is also a tax on tourism and a tax on business. Aviation doesn’t just drive exports – it is a major exporter in its own right with our airlines earning nearly GBP11bn of foreign revenues every year. Tourism is one of the UK’s most important earners and is worth GBP115bn to the UK economy."

“We take our responsibility to the environment very seriously and have taken steps to reduce our impact. We support emissions trading (ETS) in principle but a combination of both APD and ETS when it is introduced is unsustainable."

TAGS: environment | tax | business | air passenger duty (APD) | Denmark | Netherlands | aviation | United Kingdom | tax rates | tax reform

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