WHAT IS APD?
What is Air Passenger Duty? Basically it is a tax that the Government imposes on each seat sold on aircraft leaving from UK airports except on flights departing from certain airports in the Scottish Highlands and Islands. Originally introduced in 1994, the duty has gradually been increased, particularly since 2007. In late 2006 the Stern Report on climate change painted a dire picture and recommended concerted international action on reducing CO2 emissions. APD was raised in the aftermath of an environmental report and positioned as an anti-global warming tax.
In practice, though, the revenue from APD has never been assigned to environmental projects. This year the Government did finally admit that APD is simply a revenue raising tax. Faced with the enormous public debt they were accruing, the last Government again raised APD substantially in November 2009 with a second rise in November 2010.
The ‘new’ APD was structured in four tiers depending on distance from London to the destination country’s capital city and whether the passenger travelled in economy or premium class cabins. When APD was raised again in November 2010 it caused protests from tourism dependent developing nations as well as from the aviation industry. Effectively since January 2007 the UK’s Government has raised the tax on economy and premium seats for European destinations by 140 per cent. For Long haul flights the tax on both classes of seats has risen between 200 per cent and 325 per cent depending on distance travelled from London. This is why there is such dismay here and abroad at the possible announcement for a proposed ten per cent further increase in 2012.
This dismay is underlined by the unprecedented coming together of four of the UK’s biggest airlines flying from the UK. Normally in disagreement on many industry issues, the heads of EasyJet, Ryanair, British Airways’ parent International Airlines Group (IAG) and Virgin Atlantic have now launched a campaign against APD under the slogan “Axe the Tax.”
APD is a regressive tax that is particularly hard on families trying to go on holiday. A family of four flying economy to Florida has to pay £240 in APD. They would pay £300 to go to the Caribbean islands. It’s no wonder then that searches for flights to Barbados for the first half of 2011 have dropped by 50 per cent compared to the first half of 2009 before the four tier system of APD came into play. Consequently the Caribbean Tourism Organisation has understandably been campaigning against APD for some time now.
The Government has made it clear through various channels that there is absolutely no chance of APD being reduced because of their inherited need to raise revenue. This is despite the example of the Dutch Government that tried the tax and ditched it in 2009, only one year after it was imposed. The harmful effects on the Dutch economy were nearly four times greater than the revenue the country produced from imposing the tax. Not only did flying become more expensive, the Dutch competitive position was affected globally. More jobs were put at risk, and many more jobs were lost. The Dutch also found out that the tax was avoidable. Passengers were crossing into neighbouring countries to take APD free flights.
The same cross border “leaking” also happened in Northern Ireland when people were simply crossing over from Belfast to fly from Dublin instead. Possibly for political reasons, the Government recently apparently listened to Northern Irish representations and reduced APD for trans-Atlantic trips to the lowest band of APD, but the announcement was kept very quiet.
APD is damaging to the UK as an international hub and an international business destination. There is already evidence apart from Northern Ireland that business and transit passengers are being driven to use other European hubs. It seems unfortunate, therefore, that the Government should be ignoring the Dutch experience and the advice of the Aviation and Travel industries both here and abroad and is expected to increase APD yet again next year. As the bosses of EasyJet, Ryanair, BA and Virgin Atlantic are now saying it’s at least time to “Axe the Tax”.
John Barrington-Carver
Head of Corporate Communications
Cheapflights Media
