19 NOVEMBER 2012

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Article from BTNews 19 NOVEMBER 2012

COMMENT: APD A tax without reason

Special privileges for America but not for the Caribbean Islands, or Russia

The Chancellor of the Exchequer, George Osborne MP, will make his Autumn Statement in Parliament on Wednesday 5 December at 12:30.

The Statement provides an update on the Government’s plans for the economy based on the latest forecasts from the Office for Budget Responsibility. 

In very simple terms he will lay out his taxation policy for next year trying to weigh his monetary requirements against what he can grab from society. 

It is a balancing act.  In terms of air travel it is clear that the current Air Passenger Duty (APD) rates are having a very negative effect.  Some well researched financial cases have been made by respected authorities.  What they all say is that if he reduces APD, or makes it fairer, the financial contribution will be more.  But is he up to taking the gamble? 

Do not get bored with the subject.  Readers should expect enormous lobbying over the next few weeks from business, tourism and the aviation sector.  Word might just get through.  Enough shouting might just produce something.

There are two very serious points about APD which really need to be questioned. 

First - if it is to be applied it should be on the airport-to-airport distance and not on the capital of the country mileage from London.  In fact it was initially an environmental tax which makes the Treasury case sound even dafter.  As it is, APD is greater to Barbados (and most of the Caribbean) than Hawaii, far away in the Pacific.  However Russia is split East and West of the Urals for APD purposes.  Why favour the United States?

In fact our second point is related.

If it is a capital to capital tax surely UK domestic traffic should be zero rated, London to London.  Has someone the courage to challenge the Treasury.  HMRC Notice 550 (April 2012) is very convoluted.

At the current time the regions, and London, are being penalised.  With the choice of Edinburgh or Paris for a weekend do you pay £24 tax each (rising to £26 from 1 April) or £12 per person?  The same applies going to sunny Newquay from Manchester compared with some near continental point.  Cornwall needs support.  France can look after itself.

Or – if connecting – why fly via Heathrow if it is cheaper tax-wise via Frankfurt (or with KLM via one of 17 UK airports to Amsterdam – see  Kent below)?

In Scotland, Highland and Island departures pay no outbound tax.  The airports are subsidised.  Is that fair?  Northern Ireland long haul the same.  Domestic air travel is down by 20% according to reports.  What happens if Scotland gets devolution and does not apply an outbound tax?  Do the good citizens of Carlisle (and Newcastle) rush north for their flights?

The Chancellor wants to boost the economy.  One easy way is to scrap domestic APD and either reduce the international tariffs or at the very least keep them at the current level.  The evidence is there before him.

Let us not get bored.  We need to keep the pressure up over the next couple of weeks.  It might just work!

Business Travel News supports the ‘Fair Tax on Flying Campaign’. www.afairtaxonflying.org

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