October 30, 2009
With aviation under-taxed to the extent of about £9 billion pa, an increase in APD (Air Passenger Duty) is well overdue. But now that an increase is imminent, there has been a predicable chorus of protest. The arguments against have been predictable and often bogus.
With aviation under-taxed to the extent of about £9 billion pa, an increase in APD (Air Passenger Duty) is well overdue. In Nov 2008 we described how the government had planned to change the basis from a per-passenger to a per-plane tax. This was a move which AEF, together with other organisations and some politicians supported, but it was shelved.
The revised APD does, however, have one great improvement, namely new distance bands. This means that tax paid will relate better to the emissions and thus to the climate impact.
Now that the increase in APD is imminent, there has been a predicable chorus of protest. The arguments against have been predictable and, often, bogus – APD hurts families, does nothing for the environment, etc. But a new argument has now been deployed – it will hurt foreign aid workers. We append below two articles from the national press on 28th Oct. We also insert our rebuttals of the arguments.
See also calls for ‘green taxes’ including aviation.
APD hikes create discontent amongst public and airlines as Air Passenger Duty is set to rise next week, a new survey reveals that most people believe it is time to reform the travel tax.
From November 1, the APD bill for a family of four flying to the Caribbean will rise from £160 to £200 and from November 2010 that will rise again to £300.
The tax hike affects both short haul and long travellers, is worked out according to distance of flight (there are four bands) and is higher still if travelling in premium classes.
The YouGov survey of just under 2000 adults, published today and commissioned by Easyjet, highlights the fact that private jets, cargo planes and foreign passengers are exempt from the charge. It also underlines that environmentally, the tax does not work as empty planes that fly are raising less revenue that full ones. [A survey cannot “highlight” or “underline” such things. A survey can only show what the public think about the issue that the poll’s sponsor chooses to ask.]
The survey showed that four fifths of the population agreed that all flights should be taxed; however 69% said the toll should be arranged so that it tackles climate change. [While it is by no means the ideal tax for the purpose, APF does tackle climate change. To the extent that it reduces demand, emissions are reduced. Even more importantly, the new distance bands mean that the tax will relate to emissions and so it will be a true environmental tax.] Some 65% thought that foreign transfer passengers should pay the fee too. [We agree.]
The government pledged to reform APD into an emission based flight tax in 2007 but later changed its mind.
BA chief executive Willie Walsh hit out at the government this week over the APD issue. He told journalists on BA’s inaugural daily non- stop service to Las Vegas this week that the hike would traumatise the aviation industry at a time when it was suffering badly and called on the government to think again about APD. [All industries have been hit by the recession and there is no reason why aviation, which benefits from huge tax concessions, should not have to play its part in stabilising public finances.]
Easyjet chief executive Andy Harrison was also highly critical of the government’s actions on APD. He said: “Air Passenger Duty is a daft tax that the government promised to reform. It broke its promise and increased the tax burden on the average family instead. [The “average family” does not take regular long-distance flights. The great majority of flying is done by well-off people including well-off families and it seems entirely reasonable they should help compensate for the damage caused by their flights.]
“People don’t understand why their tax is going up again while pampered fat cats on private jets, cargo planes and foreign transfer passengers still don’t pay any tax at all. How can the government justify a tax break for 20 million foreign transfer passengers while charging a British family of four ₤44 to go to Europe? [AEF agrees that private jets, cargo planes and foreign transfer passengers should also be taxed. But one reason why these proposals were dropped was opposition from the aviation industry!]
“We need to make air tax greener and fairer now. It should be reformed from a poll tax into a flight tax that taxes emissions, not families.” [AEF would prefer a tax that related more directly to emissions. But such a tax would fall foul of international agreements. But because of the new distance bandings, the new APD relates more closely to emissions. It should also be noted that APD never was, and was never intended to be, just an environmental tax, let alone a climate tax. It has been made clear by the Treasury that an objective of APD is to raise revenue. Important beneficiaries of government revenue are, of course, families!]
Lives could be saved with money lost to the ‘green’ air tax
In April the Government announced plans to increase air passenger duty (APD) departure taxes on long-haul flights from the UK by up to 112 per cent next year. APD, otherwise known as a “green tax”, was introduced in 2006 with the aim of decreasing departure flights from the UK, thus reducing carbon emissions.
So far the duty has had little impact on the travel industry and so the Government has set its sights on raising it. I am disappointed in the complete lack of awareness of how this will affect the work of charities. There has been a recent backlash from consumers but there has been no “voice” on behalf of the public or voluntary sectors.
Charities are being sidelined. The APD for travel in economy class was originally set at £5 for a flight to a European destination and £20 for all other destinations. This was doubled in February 2007.
However, from November this year passengers will be charged according to how far they fly, directly hitting the budgets of medium and long-haul travellers hardest. APD is due to rise again in November 2010, making the UK the most heavily taxed country for a levy of this kind.
Every year thousands of charity workers fly from the UK to Third World countries to carry out aid. From November they will be taxed £50, which will rise to £75 in 2010. To put the costs into perspective, our research has shown that an international charity will have to raise on average, an extra £40,000 to pay the APD.
Charities should not be exempt from APD, but I feel they should be taxed a sensible and manageable fee that would not cut significantly into a budget that is meant to help the needy. With a sum of £40,000 a charity could provide more than 50,000 people with safe water, or 1,250 shelters for families during an emergency, or build 23 classrooms.
[This is emotional stuff, but it does not stand up to scrutiny. The proportion of air travel accounted for by foreign aid workers is tiny. One cannot abandon doing the right thing – changing APD – because one tiny sector might be affected. If we as a nation were really that concerned about aid workers, we could just increase the aid budget to cover the extra cost of their air fares. The money could easily be found as it would be a tiny proportion of the extra tax raised by the new APD.]
My greatest concern is over where the funds generated by APD are being deployed. There is also a worry that they are not being used towards environmental projects.
If this is an environmental tax why is the Government not helping the countries that have been the most affected by climate change? If the money is not being used for this purpose then where are the funds going? It is simply not enough to tax as a deterrent. The Government must show that it truly cares about the environment too.
[There is no good economic or social argument for ploughing money collected from environmental taxes back into related environmental projects. Indeed, theory shows that this is normally economically inefficient. If we as a society decide to help the countries that have been the most affected by climate change, as opposed to spending tax revenue on something else, then that decision should be made in its own right. The source of the tax revenue is not relevant.]
It is not only charities that will feel the impact of the increase of APD. Many developing countries that rely on tourism as a main source of income will also suffer. Countries such as Barbados, South Africa and Sri Lanka have already expressed concerns that the cost of travel will significantly decrease the number of visitors from the UK.
[Many consider it highly dangerous for poor countries to rely on the fickle tourism from rich countries. Poor countries need to develop their own resources for their own people. It is also ironic to pick out and promote that industry that is doing especial damage to those countries by virtue of climate change.]
There are many corporations within the travel industry that have begun campaigning to persuade the Government that APD should be frozen at the current level.
Virgin Atlantic is urging the Chancellor to “rethink the proposals for a tax increase and the damage to the UK airline industry as well as developing economies”.
I am also urging charities to do the same and speak up, as what is deemed a good initiative by the Government will directly take funds from the very hands of those who need them the most.
[It is entirely expected that commercial companies, who feel their profits could be affected by an increase in APD, to lobby against it. It is also entirely expected that they will use arguments such as poor people, developing economies, hard-working families rather than their company’s profits.]
• Ajaya Sodha, is the chairman of Key Travel, a travel management company that works in the not-for-profit sector