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UK Urged To Rethink Aviation Tax

by Robert Lee, Tax-News.com, London

20 July 2010


The Confederation of British Industry is urging the UK government to drop plans to amend taxation on the aviation industry, instead arguing that the UK should push for a global ‘cap and trade’ scheme to ensure the global aviation industry meets its climate change obligations.

The UK currently levies an Air Passenger Duty (APD), which taxes flights based on mileage under a three-tier system. It is proposed that this tax be rescinded in favour of a tax per plane to ensure that taxation on aviation is more reflective of carbon emissions, calculated on the aircraft’s weight, efficiency and distance traveled.

The CBI's report, called 'Green Skies Ahead, Creating A Low-Carbon Aviation Industry', argues that a cap and trade scheme would control future levels of CO2 in a cost-effective way and, in being global, would not allow damaging ‘leakages’ to other countries of either carbon emissions or economic activity.

”Under such a scheme, an overall cap on aviation emissions would be agreed. Airlines would be allocated permits to cover their emissions, and if they exceed their permitted level of emissions they would have to purchase surplus permits from companies that have made extra progress in reducing their emissions,” the CBI stated.

The CBI has called on governments to start laying the groundwork for an international cap and trade scheme when they meet at the International Civil Aviation Organization’s tri-annual general assembly in September. This meeting will reflect on progress made in Copenhagen on climate change issues and begin preparation for the next UN Climate Change Conference at Cancun, later in 2010.

John Cridland, CBI Deputy Director-General, said:

“The best way for the world’s aviation industry to meet its climate obligations is through a global cap and trade scheme. Such a scheme would include all airlines, removing scope for leakage of emissions from one country to another, and would run with, not against, the grain of this international industry.”

“The [UK] coalition government should be wary of introducing a domestic ‘per plane’ duty to replace [its] Air Passenger Duty (APD). It would be ineffective, damage competitiveness, and would distract from the important goal of establishing a global cap and trade scheme.”

The CBI supports the inclusion of aviation in the EU’s Emissions Trading Scheme (ETS) from 2012. This is an important step in the right direction, it says, but has argued that it remains an imperfect mechanism for regulating aviation emissions until a global cap and trade scheme is established.

Since 1994, APD has been levied on all passengers whose journey originates at a UK airport. In 2009/10 the duty raised GBP1.9bn for the government.

TAGS: environment | tax | business | air passenger duty (APD) | pollution tax | aviation | United Kingdom | environmental tax

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