Increase in Air Passenger Duty

9th December, 2006

The government has at last responded to calls to increase the present small tax on air travel. In his pre-budget statement in Dec 06, Gordon Brown announced that Air Passenger Duty (APD) would be doubled.The government has at last responded to calls to increase the present small tax on air travel.In his pre-budget statement, Gordon Brown announced that Air Passenger Duty (APD) would be doubled. See link at the end of this article for text of the statement.For nearly 10 years, the Aviation Environment Federation and other groups have been arguing that aviation should be taxed so that it pays towards the environmental damage that it causes and so that it stops free-loading off the rest of the economy and the taxpayer. The arguments from AEF and its fellow NGOs convinced independent researchers and academics and the Conservative and LibDem parties and the media who all added their weight to calls for realistic taxation.APD currently brings in £0.9 billion and the change would increase the amount to about £1.8 billion. This is still only a fraction of the tax that aviation should be paying. We argue that aviation that on general grounds of taxation and equity aviation should be paying around £9 billion pa in tax – see tax avoidance article. The increase of £0.9 billion is therefore only 10% of what is needed. But it is a useful start.The industry also needs to pay for its ‘external costs’ – that is the costs it imposes on society (often called ‘Polluter Pays’). This is emphasised by the recent Stern report. An estimate by Airport Watch suggested that the external costs of aviation are about £3 billion pa – see external costs article. However, this used a government figure for the economic cost of greenhouse gas emissions. Stern suggests that a figure 4 times higher may be appropriate.The likes of Easyjet have claimed that this tax will have no environmental benefit. This is misleading and untrue. Firstly, APD was not introduced as an environmental measure; it was introduced to correct the anomalous tax exemption of aviation.Secondly, the tax will have an environmental benefit. The ADP will increase (slightly) the price of air travel and all commentators agree that price has an effect on demand. The government estimates that 10% increase in price will reduce demand by 9%. Reduction in demand reduces the environmental impact – the government estimates that by 2011, this small change alone will reduce emissions of carbon dioxide by over one million tonnes pa.