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UK 'Losing GBP1bn' Because Of APD

by Jason Gorringe,, London

29 November 2011

The Tourism Alliance has published a research report which warns that the UK economy stands to lose out on GBP1bn (USD1.56bn) in inbound tourism-related economic activity as a result of the government's policy of taxing aviation through its Air Passenger Duty (APD).

The new research finds that APD has already cost the UK economy over 23,000 jobs in the last seven years and if the government sticks to its plans to increase APD yet further, it will cost a further 6,000 jobs and an additional GBP1bn by 2017 (on top of the existing GBP1bn annual loss).

The report aims to quantify the impact of the UK’s passenger taxes, which presently are the highest in the world, and finds that UK air taxes are the equivalent to a 4.4% ‘tourism surcharge’ on visiting the UK by air. This tax burden will result in a 5.7% decrease in the UK’s annual inbound tourism earnings, worth GBP1.15bn in 2011.

If the government pushes ahead with its planned increase in APD charges by twice the current inflation rate next year, the study suggests that the average cost of APD for tourists flying to the UK will rise by GBP3.43 to GBP37.69. This increase alone will reduce the UK’s tourism earnings by a further GBP575m over the next five years and will increase the number of jobs lost as a result of APD to 25,300. This loss of tourism earnings could be increased to GBP1.1bn and equate to 29,200 lost jobs by 2017 if the government maintains its policy of increasing APD in line with inflation over the five years following the 2012 increase.

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.

Brigid Simmonds OBE, Chair of the Tourism Alliance said: “Government policy is putting off tourists from coming the UK. At a time when we need to encourage and nurture economic growth the government insists on disincentivising inbound tourism.”

She added: "Our research demonstrates incontrovertibly that because the UK levies the world’s highest aviation passenger duty it is costing British jobs and is a barrier to economic growth. What’s more the planned rises to APD – including a double-inflation rise in 2012 – mean that the government is very likely to miss its own targets to increase inbound tourism over the next four years.”

TAGS: tax | business | aviation | United Kingdom | travel and tourism | inflation

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