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UK airlines seek to evade taxation

While both EU and non-EU airlines have been complaining noisily about the modest amount they will be required to pay for emissions permits from 2012 under the EU ETS, four UK and Irish airlines this week had a go at Air Passenger Duty – the only tax in the UK levied on flights. Ryanair, Easyjet, Virgin Atlantic and British Airways have called for the duty to be scrapped ahead of George Osborne’s statement later this month, in which he is expected to announce APD increases. With public finances stretched, a number of taxes such as VAT have already been increased, while APD rates have so far been frozen.

AEF gave comment to Channel 4 News, noting that while Government figures suggest that the benefit to the aviation industry as a result of its paying no fuel tax or VAT is around £10 billion a year, APD brings in only £2 billion. The four airlines ‘pleading poverty’, notes Channel 4, have all recently made millions of pounds in profit. Budget airline Ryanair, for example, reported a £467 million profit in the six months to September 2011.

Airlines have also claimed that the introduction of EU ETS, assuming it withstands the current battering, will mean that paying any APD will represent a ‘double counting’ of environmental costs. But APD was never designed as an exclusively environmental tax. Suggestions that all APD revenues should be ploughed back into environmental spending are best understood as an attempt to get the Government to spend money on measures that the industry would benefit from and should be funding itself, such as the development of cleaner technology that could cut fuel costs .

With the UK committed to making CO2 cuts of 80% by 2050, it is clearly unacceptable for aviation emissions to continue rising as they have done in the past, so additional environmental policies, such as the EU Emissions Trading System (which will reward airlines that manage to cut their emissions while punishing the most polluting), and specific UK carbon targets for the sector, are essential alongside Air Passenger Duty.