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UK Conservatives Propose New Green Air Taxes

by Robert Lee, Tax-News.com, London

13 March 2007


The UK Conservative Party has launched a consultation exercise on how to use environmental taxes to reduce the rapid growth in carbon emissions from aviation.

Highlighting the idea of a new green air miles allowance for every passenger, Party Leader David Cameron declared: "We should be taxing in a smart way with taxes at the margin that change behaviour. We need to make carbon reduction as important as the Budget."

While rejecting suggestions that flying is wrong and should be stopped, Cameron nevertheless argued that the rapid predicted future growth of aircraft emissions must be cut if Britain and the rest of the world are to meet national and international targets for reducing greenhouse gas emissions.

With the consultation focusing on the UK national effort, he suggested that the current system of aviation taxation in the UK is fundamentally flawed - with Air Passenger Duty not directly linked to carbon emissions, and providing no incentives for airlines to use more fuel-efficient aircraft.

Addressing the Green Economy Conference in London, Cameron stated: "In aviation, we are directly taking on the most difficult challenges. Carbon emissions from aircraft are taxed less than virtually any other form of carbon, yet because they are released high into the atmosphere, they can do most damage."

Accusing the Labour Government of confronting the problem with a superficial, short-term spin approach, he added: "We have had ten years of rising emissions and wasted opportunities. The Chancellor is giving green taxes a bad name. Air Passenger Duty is not directly linked to carbon emissions, and provides no incentives for airlines to use more fuel-efficient aircraft."

Promising a different approach, Cameron stressed that new environmental taxes will replace and not add to existing levies. He explained: "We have made clear that any green taxes introduced by the next Conservative Government will be replacement taxes, not new taxes. Any rises in green taxation will be compensated by reductions elsewhere - for example in taxation on families. We want to use the tax system to encourage greener behaviour, not to bleed taxpayers dry."

Meanwhile, Shadow Chancellor George Osborne commented: "At the Conservative Party conference last year I outlined how I wanted to rebalance the tax system away from taxing the good things towards taxing the bad. Our consultation document on the future of aviation taxation is a detailed, serious and thorough analysis of the weaknesses of the current regime whose problems have been summed up by Treasury Minister John Healey when he described it as a 'blunt instrument'."

"Our Greener Skies consultation sets out credible proposals for curbing the future growth of emissions from air transport. Our consultation shows how this can be done in a way that does not tax people out of their one foreign holiday a year but instead focuses on dirtier aircraft and more frequent fliers. It is important that people understand that for each additional pound raised in aviation tax, there will be a matched reduction in family taxes so the overall tax burden will not rise. With our principle of pay as you burn, not pay as you earn, we are proving we are prepared to take tough and long term decisions for a strong stable economy and a cleaner environment."

The consultation calls for submissions in response to three main policy ideas: charging fuel duty and/or VAT on domestic flights; replacing APD with a per-flight tax based more closely on actual carbon emissions; and introducing a 'Green Air Miles Allowance' so that people who fly more frequently pay tax at a higher rate.

The document sets out five principles that a reformed system of aviation taxation should satisfy: to reduce the overall growth in emissions from aviation; to highlight the crucial role for national policies; to ensure that any new environmental taxes should be replacement taxes, not additional taxes; that any reforms should link tax incentives more closely to carbon content and provide better incentives for fuel efficiency; and that any reforms should ensure that the distributional impact is not regressive.


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