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UK Air Tax 'Holding Smaller Airports Back'

by Robert Lee, Tax-News.com, London

17 March 2015


The Air Passenger Duty is the principal threat to the UK's smaller airports, according to a new report by the Commons Transport Committee.

The report argues that because APD is applied to both the inbound and outbound legs of domestic return flights in the UK, passengers traveling from smaller airports in the UK are disproportionately affected. More generally, APD places all UK airports at a disadvantage compared with their European Union competitors.

The Transport Committee found that the recent introduction of an exemption for children was a marginal change that did little for smaller airports and nothing for business travelers. Several airlines told the Committee that they had decided either not to route to the UK or to fly less frequently because of the impact of APD.

The report also notes the ongoing debate over the transfer of power over APD to the UK's devolved assemblies.

It concludes that APD prevents airports in Northern Ireland competing on a level playing field with airports in the neighboring Republic of Ireland. This has in turn cost jobs, growth, and connectivity. However, were APD scrapped in Scotland, airports in England would be subject to a similar competitive disadvantage to that currently experienced in Northern Ireland. Any regional devolution within England or Wales would extend a "patchwork" of APD-derived market distortions.

The report stresses that the Government should "act strategically and in the national interest to address APD."

Committee Chair Louise Ellman commented: "Smaller airports drive economic growth. But the smaller airports sector – which is vital to people and businesses in the regions – is limited by Air Passenger Duty. Transport Ministers must stand up for smaller airports and make the case to the Treasury that APD squeezes jobs, growth, and connectivity."

The Committee defined a smaller airport as one with a Civil Aviation Authority (CAA) license that handles fewer than five million passengers a year. The nine busiest UK airports fell outside the scope of the inquiry.

TAGS: tax | business | air passenger duty (APD) | Ireland | government committee | aviation | United Kingdom | tax rates | tax reform | Europe | Scotland

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